Select Budget Committee 51524

Good morning.

It is the May 15th, 2024 Select Budget Committee meeting will come to order.

It is 930 a.m.

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

Will the clerk please call the roll?

Council Member Saca.

Here.

Council Member Wu.

Council Member Hollingsworth.

Council Member Kettle.

Here.

Council Member Moore.

Here.

Council Member Morales.

Here.

Council President Nelson.

Council Member Rivera.

Present.

And Chair Strauss.

Present.

And I just received a message Council Member Wu is on her way and both her and Council President Nelson are excused until they arrive.

Fixed present.

Thank you, Clerk.

We have five items, and we have Council President Nelson in the chambers now.

We have five items on the agenda today.

Council Bill 120779, Briefing, Discussion, Possible Vote on the Seattle Guarantee of Museum Development Authority Refunding Bonds.

Council Bill 120773, Briefing and Discussion, Possible Vote on Legislation to the Exceptions Bill.

And then Council Bill...

120774 briefing discussion, possible vote on the carry forward bill.

We do have two presentations today wrapped into a single presentation, which is a general fund balancing analysis presentation.

And then following that, we will have the jumpstart payroll expense tax fund briefing presentation.

Before we begin, if there is no objection, the agenda will be adopted.

Hearing no objection, the agenda is adopted.

Colleagues, for our awareness, these first couple bills are going to, we're going to spend a very short amount of time on them so that we can reserve the largest part of this meeting for the presentations.

And clerk, how many folks do we have signed up for public comment today?

We have one remote who's not present and three in person.

All right.

I see the person signed up online is looking to speak to a different item, not in my committee.

So seeing as we have no one remotely or physically present, we will open and close the public hearing.

We have three people in person.

Oh, we have three people.

Sorry, I missed hearing that.

I went straight to online.

Well, with that, we will now open the hybrid public comment period.

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

Each speaker will have two minutes.

We will start with in-person speakers first.

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

The public comment period is up to 20 minutes.

Speakers will be called in the order in which they registered, and speakers will...

We'll start with in-person first.

With that, clerk, may I have the list?

Thank you very much.

We have three people signed up today.

We have Cindy Bolton, Bob Strong, Jeff Drager in that order.

And you'll have two minutes apiece to speak and come on up.

Welcome.

Good morning.

to address the committee.

My name is Cindy Bolton and I'm the Chief Financial Officer at the Seattle Art Museum representing and working with the Museum Development Authority on the proposed bond refinancing.

We've been looking forward to this day for quite a while when the bonds would be eligible for refinancing.

Not surprising or unique to us, the pandemic hit the museum hard and it is taking a couple of years for us to fully come back.

We believe that a strong arts and culture ecosystem is a necessary element for a healthy and vibrant city and that we play a role in the city's economic well-being.

We revive and thrive together.

The savings from this refunding will be a critical source of funds for the museum for the years to come, and the timing is perfect with the amazing and transformative things on the horizon starting with the opening of the waterfront next year.

We are excited to contribute to this important initiative both at the museum downtown and at the Olympic Sculpture Park.

Lastly, a very big thank you to our colleagues in the city debt team and city finance department and the mayor's office for all of their support, expertise, and assistance in getting to this point.

We know this is an exceptionally busy time of year for them.

Thank you again for your time this morning.

Thank you.

Thank you, Cindy.

Up next is Bob Strong, called by Jeff Drager.

Welcome, Bob.

And we have Councilmember Hollingsworth in the house.

Hi.

Bob Strong, and I'm chair of the MDA and a longtime board trustee at Seattle Art Museum.

I just want to add my thanks to the support of the city over all these years.

Been great partners on all of our sites at downtown, Volunteer Park, Sculpture Park, very much appreciate it.

The original financing in 2005 was critical, refunding in 2014 equally important, and now we have the current refunding.

Great partners and the, as Cindy noted, these are still challenging times for the museum as we all know with all that's gone on for all arts and cultural institutions.

The savings with the lower tax exempt rate for the refunding.

again, is going to be critical for the museum and will go to enhancing our programming, which will improve our attendance, all important stuff.

I've been a Seattle native, or I am a Seattle native, and been around for a long time.

And when I see what's taking place in the city, I see tourism and hotels coming back.

I see the museum recovering nicely.

Add to that the transformation of the waterfront.

Just a super exciting time to be a part of the city.

Again, add to that, 2026 and the World Cup, and totally transformative.

So I'd like to thank the City Council for all their support.

I'd like to thank the Finance Committee for helping us with all our financing.

And appreciate it very much.

Thank you.

Thank you.

Up next is Jeff Draker.

Welcome, Jeff.

Good morning, and thank you for this opportunity to address the committee.

My name is Jeff Drager.

I'm the interim CEO and director of the Seattle Art Museum.

Arts and culture support Seattle recovery.

They benefit local businesses, other institutions, residents, and our visitors.

We know the arts bring people into our city.

Commerce follows culture.

SAM is committed to supporting our community as a leader in arts and culture.

This includes the robust programming and exhibitions that Bob referred to.

They reflect values such as diversity, equity, and inclusion.

We're also co-chairing the DSA Arts and Culture Coalition that is working with the city leaders, other partners to help lift up the sector and downtown with it.

Museum has been anticipating this bond refinancing opportunity for the Museum Development Authority.

The savings really will help fund exhibitions, public programming, and education activities that are critical to keeping our mission in motion.

We appreciate the collaborative support of the city debt and finance teams in this endeavor.

Timing could not be better as we lean in to help make the most of a reviving urban core, transforming waterfront, brimming anticipation of the World Cup, and so much more.

As a cultural institution, as in the heart of downtown, SAM is part of the city's economic wellbeing while serving the community through art.

Thank you again for your support and service, and again to our city partners in this endeavor.

Thank you.

And we also have Council Member Wu joining us, and so we now have a full dais.

Seeing as we have no additional speakers present remotely or physically, we will move on to the next agenda item.

Colleagues, the first agenda item on our agenda today is the City of Seattle Guarantee of Museum Development Authority, MDA, refunding bond legislation.

Please come on up.

A LITTLE BIT OF BACKGROUND, THE FINANCE, NATIVE COMMUNITIES, AND TRIBAL GOVERNMENTS COMMITTEE RECEIVED A BRIEFING ON THIS ITEM ON THE MAY 1, 2024 COMMITTEE MEETING.

I BELIEVE ALMOST, I GUESS I DIDN'T CHECK IF EVERYONE'S GOTTEN A BRIEFING, BUT I'M ASSUMING THAT EVERYONE HAS.

WE ARE JOINED AGAIN TODAY BY INTERIM OFFICE OF CITY FINANCE DIRECTOR JAMIE CARNELL AND DEBT MANAGEMENT DIRECTOR CHRISTI BEATY.

I'LL PROVIDE JUST A BRIEF OVERVIEW OF MY UNDERSTANDING OF THIS BILL, WHICH IS We took out a 30-year bond, and within that 30-year bond, we had two opportunities for refinancing.

One was a decade ago, and one is today.

And we have the opportunity to refinance at a lower interest rate, which saves a fair amount of money.

And that's the synopsis.

Christy, Jamie, I'll turn it over to you.

And I see we're getting microphones all set, so please feel free to take a moment to be ready.

Perfect, thank you.

Fantastic.

Good morning, Council Chair Strauss and members of the Select Budget Committee.

My name is Christy Beattie, and I am the City's Debt Director, and I am joined today by Jamie Carnell, Interim City Finance Director, and Dan Eder, Director of Policy with the Mayor's Office.

And we want to take just a moment this morning to talk with you about the legislation that's before the Council.

And just a moment while we bring this up on the screen.

Yes, no problem.

Thank you.

Just very briefly, as a PDA of this city, the MDA owns the Seattle Art Museum facility and leases the facility to the Seattle Art Museum as the nonprofit entity.

In 2005, the MDA issued $61 million in bonds to fund the expansion of the Seattle Art Museum and the Olympic Sculpture Park.

At that time, the city guaranteed those bonds, which committed the city's full faith and credit to ensure the payment of debt service on the bonds through the term of the bonds in 2031. The city's guarantee allowed the MDA to borrow at a lower borrowing cost than it could have achieved on its own.

The MDA bonds were refinanced in 2014 to achieve savings and those bonds savings flow back to the Seattle Art Museum to assist with museum operations.

The MDA is now seeking the city's guarantee again as part of refunding the MDA bonds in 2024. The legislation before the council authorizes the city's director of finance to approve and sign, let's see, I'm trying to move the slides along.

A third guarantee agreement between the MDA, SAM, and the city, which would authorize the city's guarantee of the bonds.

It increases the city's flexibility under the agreement to respond to the MDA and SAM in the event that financial needs are brought back to the city for consideration in the future.

And importantly, this guarantee agreement does retain the terms that currently exist that provide and preserve the city's right to be reimbursed if the city were to make any advances under the guarantee agreement and preserves that any changes to the agreement in the future would be brought back to council for authorization by ordinance.

In sum, if the legislation is approved, the refunding will proceed, the debt service amount would be reduced, and the city's exposure under the guarantee would also be reduced.

If not approved, the refunding would not occur, the city would retain its current exposure under the bonds, and there would be no change in debt service on the bonds through the maturity in 2031. In terms of timing and next steps, once the legislation is approved, if approved, the city's debt management team will continue to work with MDA to prepare for that financing transaction that would occur in early July.

And with that, I will pause for any questions.

Thank you, Christy.

And Director Carnell, any further comments?

No, I just appreciate DMDA being here in support.

This has been a great partnership, and I'm looking forward to continuing it.

Fantastic.

And Director Eder, if you could provide the full select budget committee the same overview that you provided at FNC regarding the additional requests and the city's position on those additional requests.

I'd be happy to do that.

Thank you, Chair Strauss.

I described this at the Finance Committee as a win-win.

I think this is good for the city, and it's good for the museum.

It's good for the reasons that you just heard in the presentation, that it reduces both the city's exposure, since we're backing these bonds, and because we can lock in lower interest rates, it helps the museum with lower debt service through the life of the bonds.

The museum has asked for us to consider some changes to a complicated set of agreements that were established about 20 years ago.

We are eager to engage with the museum to find further win-wins on this, but that's going to take a little bit longer than we had runway to take advantage of the favorable debt service bond rates.

So those are conversations that will come in the balance of the year.

And as you saw on the slides, any changes to the city's financial arrangement with the museum will come back to the city council in the form of a proposed ordinance for your consideration.

Thank you.

Just in summary, the museum asked us, the Museum Development Authority asked us for additional changes.

We said not at this time and we'll continue the conversation.

So we haven't committed to anything.

We have committed to a conversation and any changes would come back before us.

That is exactly right.

Excellent.

Deputy Director Panucci, do you have anything to add to this presentation?

No, I think they covered it.

Thank you, Chair Strauss.

Fantastic.

And, Christy, my last and only question, then I'll turn it over to my colleagues.

In our conversations, you'd mentioned in 2014 when we refinanced, the interest rate was at about 5%.

Right now, we're looking at between 2% and 3%.

We can't know what rate we'll lock in today until...

We lock it in because they change every day.

Is that general?

That's exactly right.

The bonds were last refinanced with a 5% coupon or interest rate.

Currently, we are anticipating a rate on the refinancing of between 2% to 3%, which would result in savings per year for the Seattle Art Museum of about $250,000 to $400,000 per year.

That rate will be determined once the bonds are priced or sold in early July.

Thank you, and I just want to appreciate what a complex piece of legislation this is, and you made it very simple.

Colleagues, questions?

Looks like you have educated us into silence.

I am not a panelist.

If you could add me as a panelist.

Who's got the question?

Go for it, Councilmember Kettle.

Chair Strauss, thank you.

I just wanted to take the opportunity as the District 7 representative where the SAM is located and where our arts and culture is primarily centered to say thank you.

First, for the SAM2 representatives to be here today, I really appreciate it.

but also for the work that's been happening on the executive side and also with our central staff team as well.

This is really important.

And this is not a one-off either.

So we need to work with the SAM and help the SAM.

But we also, I've had tours with Ben Royal Hall, the various issues.

It may not be like this, but there's similar issues in terms of bringing back the entire arts and culture community.

And I'd like to add on to that, too, the Pacific Science Center.

I had a great event yesterday at the Pacific Science Center.

Seattle Center, there's those pieces too, the theater, Puget Sound.

We need to be working these bit by bit and then building some momentum for our arts and culture community.

So I just wanted to say thank you for all involved for your work on this.

Thank you.

Seeing as we have no other comments, well said, Councilmember Kettle.

I move to recommend passage of Council Bill 120779. Is there a second?

Second.

It has been moved and seconded to recommend passage of Council Bill 120779. Are there any final comments?

Hearing none, will the clerk please call the roll?

Council Member Saka?

Aye.

Council Member Wu?

Yes.

Council Member Hollingsworth?

Aye.

Council Member Kettle?

Aye.

Council Member Moore?

Aye.

Council Member Morales?

Yes.

Council President Nelson?

Aye.

Council Member Rivera?

Aye.

And Chair Strauss?

Yes.

Nine in favor, none opposed.

Thank you.

Council Bill 120779 passes unanimously.

And we will be sending all of the bills from this committee to the May 28th City Council meeting because I am excused from full City Council next week.

Thank you.

We'll be moving on to the next presentation.

We have Eden Cizek with Council Central staff and Deputy Director Ali Panucci.

The second and third items on the agenda will be briefed together and then we will vote on them separately.

And so we have items two and three.

Clerk, will you please read both items into the record, the short title.

Agenda item two, council bill 120773, amending ordinance 126725, which adopted the 2023 budget, including 2023 through 2020 capital improvement program.

And agenda item three, council bill 120774, amending ordinance 1269955, which adopted the 2024 budget.

For briefing, discussion, and possible vote.

Thank you.

These two items are the carry-forward and exceptions bills.

These are bills that we have every single year.

Carry-forward, in layperson's terms, are funds that were not expended last year, that were budgeted for last year, that we need to carry forward into this year's budget.

So they are asking for permission.

Exceptions are in places where there was overspend within certain budget line items.

And this is the exception, and these are, in a sense, asking for forgiveness, so asking for permission, asking for forgiveness.

The Finance, Native Communities, and Tribal Governments Committee received a briefing on these two items on the May 1, 2024 committee meeting.

Central staff also distributed a memo on April 26 that provides background on the budget adjustment process.

describes all approved adjustments since January 1st of this year and describes the council bills and highlights notable increases in the proposed legislation.

Proposed amendments were requested to be submitted to Council Central staff by last Monday, May 6th, and we did not receive any amendments at that time, although I've heard additional concerns today.

And so we will address these issues.

We are joined again today by Central Staff Policy Advisor Eden Cizek.

Eden, I'll pass it over to you.

Let me pull this up on the screen.

Perfect.

Good morning, council members.

My name is Ed Cisich with Council Central Staff, for the record.

In the last briefing, I provided background on the budget adjustment and the budget adoption process overall.

In this presentation, since I've briefed this or I've had outside briefings in council offices on this with most council members on this legislation, so I'll focus on the two bills before you.

And so council bill 120774, the carry forward legislation.

So this bill is essentially seeking council approval to continue work that was budgeted in 2023 and is anticipated to continue into 2024. So it just needs the funding in order to do that.

And the exceptions bill provides retroactive budget authority for the prior year's budget for spending that has exceeded the revised budget.

so i'll start with the carry forward legislation so carry forward legislation requests approval for a total 2024 budget increase of 201.4 million dollars from several city funds i'll highlight the departments with the highest increases proportional to their adopted budget and in the memo i've highlighted several other items which have significant amounts or may be of interest to council members and those start on page five of the memo.

So starting with OPCD, this carry forward would double the department's revised budget and the bulk of that is for equitable development initiative.

Those are awards that haven't been contracted yet and the contracting process for those long-term projects often takes multiple years and the funds do not always get contracted within the year of the RFP.

The next we have Office of Housing, which is a $72 million increase.

And most of that is jumpstart funding related to multifamily housing.

These funds have been awarded for specific projects, but have not yet been encumbered in the city's financial system, just due to timing of loan closings for these projects.

And we've also got a $29 million increase in finance general.

The largest chunk of that is to continue the participatory budgeting program.

Thank you, Ed.

And let's...

So this represents the majority over three-quarters of the carry-forward funding.

So I'll take a pause here before moving on to the exceptions bill.

Fantastic.

And I recognize you've shortened this presentation at my request.

In your presentation at our last committee, we did talk about the other budget adjustment processes that we will be taking up this year.

Today, we have the carry forward and exceptions.

We will then have the mid-year and year-end supplemental budgets later on in the year, and we'll have additional grant acceptance and appropriations.

So these are two of many different bills that we have before us.

Pausing on these carry-forwards, colleagues, are there questions on these items at this time?

I'm seeing none, so please continue along.

All right, so moving on to the exceptions bill, Council Bill 120773. The total 2023 exceptions request is $12.8 million, and over $12 million of that is for two items that exceeded their 2023 budget appropriation.

First, a high volume of pension payouts is driving an $8.3 million industrial insurance fund increase in the human resources department.

And the second is an SPU item, which is a $3.3 million solid waste fund exception driven by higher than expected inflationary adjustments to SPU solid waste line of business.

And given that solid waste contracts budget is over $130 million, this is a small percentage increase compared to their budget.

Thank you.

And, Ed, before we move on to the next steps, do you want to check?

Colleagues, any questions on exceptions?

Seeing none, continue, please.

And in closing, and you mentioned most of this, so May 28th, will be the final action on Council Bills 120, 773, and 774 at the full City Council.

And as Chair Strauss mentioned, there are some additional upcoming comprehensive budget legislation, including the mid-year and year-end supplemental, and as well as the mid-year and year-end grant acceptance appropriation and acceptance bills, as well as any standalone legislation that may come up throughout the year.

And that concludes my presentation.

Thank you, Eden.

And colleagues, are there any questions?

I'm just going to turn it over to you all if you have any questions at this time.

Chair, I believe Deputy Director had a comment.

Oh, fantastic.

Vice Chair Rivera, Chair Strauss.

I just wanted to flag, if anyone was watching at home and downloaded this presentation in advance, we initially had the date for final action as June 4th.

We've corrected that for the presentation this morning, but nothing else was changed.

So if you're following along, I just wanted to flag that.

Fantastic.

Council Member Saka.

Thank you, Mr. Chair, and thank you, Ed, for this helpful presentation and also meeting earlier this week for the offline presentation.

Curious to better understand.

So as I understand it, these carry forward and exception bills are sort of customary, routine, standard things that generally come up every year.

And So this is certainly my first opportunity to be confronted with these concepts.

But just be curious to better understand how both the carry forwards and the proposed carry forwards and exceptions are similar or different, more importantly, different than how they are in typical years?

And what are some of the kind of unique features of this carry forward in this specific exceptions proposals relative to other years?

So carry-forward items vary from year to year.

Carry-forward items are for items that were not completed in the prior year, so it's always gonna be different items in the bill overall.

However, I believe this carry-forward legislation overall is smaller than it has been in prior years, as well as the exceptions.

So, for example, Seattle Department of Transportation, this is the first time that they have not had an exception in their budget, and I believe that's part of the good work that City Budget Office, in partnership with Central Staff and the Law Department, during the...

Have made for during the fiscal transparency work that we've been doing So in the past this bill has been as high as 34 and a million dollars and higher So this is one of the lower years for both of the bills.

I might just add While they are routine in the city of Seattle like we do tend to see these bills annually in a I had to say this.

If we were planning better or thinking more for the future, we wouldn't have these bills.

And we have been working with the budget office for a number of years, particularly on the exceptions bill, to try to avoid these types of things because it is...

You know that as chair just describe it it's asking for forgiveness after after the fact, some things can't be anticipated.

Something comes up in December there's a snowstorm the city has to expect you know we couldn't necessarily plan for that.

But we have been scrutinizing and looking at those bills, as far as we know, we are the only jurisdiction that has an exceptions ordinance.

I mean, we haven't done a comprehensive of every city in the country, but we did do some review a couple of years ago and didn't identify anywhere else that has such a process.

So I would love to see a year where we do not have an exceptions bill.

In terms of the carry forward, we have been looking at that and trying to identify patterns, because really what that's saying is we budgeted more than the department can spend in a given year.

Some types of appropriations like for the Office of Housing or the Equitable Development Initiative really operate more like capital investments.

Our capital appropriations automatically carry forward because what we have identified a project when the actual spend will happen on a major infrastructure project spans multiple years and most of it might get spent in the fifth year.

So we are also looking at where these regular carry forwards are and if council agrees with these types of investments, we might consider policies to automatically carry these funds forward that operate more like capital investments.

But also looking at, are there other patterns we can identify, or are some departments just given more budget authority in a given year than they need so we could reduce their budget without actually impacting services.

And I can tell you so far, we've not had any big aha moments where we could write, like where there's a clear pattern, but we are looking at all of that to your point, Council Member Saka.

Yeah, so thank you, Allie, for anticipating my next question.

uh yeah as a policy matter i think we need to be in the business of having thoughtful deliberative planning and and budget and making sure we minimize these kind of uh carry over and except especially exception bills and um but thank you for your work and you're the helpful explanation and uh and and, you know, kind of educating me here and, you know, like, guiding a path for what's potentially possible going forward as well.

Thoughtful planning and budgeting, very, very, very, obviously, really important.

So, tell us where you're gonna spend it, and...

Don't come begging for more.

Yeah, and if I might just add, this is a perfect segue to the next presentation on the general fund balancing analysis.

That is really work that the central staff fiscal policy team has been doing over the last several years in partnership with the council.

with the previous budget chair and the current budget chair to really focus on the general fund financial plan.

And we would, at some point, I would love to have more time to focus on the rest of the budget as well, but it is really just a one step we've taken to really put a focus on the need for real financial planning and thinking about how to project expenses into the future.

So hopefully in 20 years from now, we don't find ourself facing a general fund deficit.

Thank you.

Really good question, Council Member Saka.

And just to again highlight, I am impressed that we have reduced the exceptions down to three buckets essentially right now.

That is a change from years past.

I have Council President and then Council Member Rivera.

Council President.

I'll just briefly, you touched, Deputy Director, what I was going to ask about, which is you mentioned patterns, that you were trying to see patterns of the carry-forwards.

And I was simply going to ask, do we track the opportunity costs of these carry-forwards?

Because when we lock up money in one place, Sometimes, well, that means we have to forego expenses in another area in a tight year.

And I just remember one time there was money that needed to be put into the Rainy Day Fund to shore up our bond rating, et cetera.

And the point is that Whatever policy changes we're talking about or whatever your efforts are to make sure that we understand patterns better, that is something that I would like to know.

When there's a large summit sitting in one place that takes a long time to get out the door, within that department budget, what are we not buying with that money?

Yeah, so that is what we hope to have time to be able to look like.

We've started that analysis, and then there are, you know, trade-offs, as you're pointing out, right?

There are reasons to hold some money for multiple years, like the Office of Housing Funding, because it operates more like capital, but there is also, as you point out, the question of the opportunity cost.

So we will look at that and hope to have something more to share with all of you at some point in the near future.

Wonderful.

Any other questions, Council President?

No.

Seeing none, Council Member Rivera, please.

Thank you, Chair.

I just wanted to flag that the carry forward sometimes gives us the ability to look at programs that have substantially increased over time.

It gives us the ability to see if those departments are able to implement those funds.

when that type of substantial growth has happened in a particular program.

So while we don't, it would be great to be in a place where we're not having to do carry forward for areas where we've increased a department's budget substantially.

It shows us whether or not they have had the ability to implement those funds.

So I would I would also consider that.

I think these are important parts of the discussion of budget reform that needs to be implemented.

Colleagues, any other questions on these two bills?

We're going to vote on them in order.

So we'll first have 120773 and then 120774, the carry forward first and then the exceptions.

So any further questions?

Seeing none, I move Council Bill 120773.

Second.

It has been moved and seconded to recommend passage of Council Bill 120773. Clerk, will you please call the roll?

Wait.

Sorry, Chair.

I think you mixed up that 773 is not carry forward, but the exceptions.

Correct.

I want to make sure we're clear on what we're voting on.

And this is my note to staff.

We need to clean up this script.

sorry i have both of these being done at the same time which is not how we do this so we are just going to move 773 which is the carry forward and then exceptions 773 is the exceptions or 773 is the exception so we're going to do exceptions first and then we'll do carry forward because both of these are going to be written at the same or voted on essentially back to back so Seeing as we have no further comments, I'm going to just start from the top.

I move Council Bill 120773.

Second.

It has been moved and seconded to recommend passage of 120773. Clerk, will you please call the roll?

Council Member Saka.

Aye.

Council Member Wu.

Yes.

Council Member Hollingsworth.

Yes.

Council Member Kettle.

Aye.

Council Member Moore.

Yes.

Council Member Morales.

Yes.

Council President Nelson.

Aye.

Council Member Rivera.

Aye.

And Chair Strauss.

Yes.

Nine in favor, none opposed.

Thank you.

Moving forward, I move to recommend passage of Council Bill 120774. Is there a second?

Second.

It has been moved to recommend passage of Council Bill 120774. Final comments?

And I see Council Member Rivera.

Yes, thank you, Chair.

I want to say that I'm going to be abstaining for today's vote on the Carry Forward Bill because I have questions and concerns about two programs, the Equitable Development Initiative and participatory budgeting, excuse me, budgeting programs.

I've asked for a substantial briefing from the Office of Planning and Community Development for the last two months on the EDI, and they have consistently rescheduled and delayed delayed, which now has in turn delayed my ability to give this program a thoughtful and detailed review.

which is what I promised constituents I would do with the funding of city programs that come before our council.

And related to the participatory budgeting, this is one-time funding, which is now a little over 27 million, which has been carried forward since 2020. I have questions about what this one-time funding will cover and whether there are any programs being contemplated with this money that would need ongoing funding which was not the initial intent of the investment when it was added to the city's budget.

As I have said, it is our responsibility to bring accountability to the city's budget, and this includes reviewing city programs for outcomes and performance.

This is the review I am trying to engage in with the department, and I cannot vote to carry forward funding in the absence of the full information and review of these programs I will continue to request this information, which I hope departments will provide before our full council vote on this legislation later this month, May 28th.

Thank you, Chair.

Thank you, Council Member Rivera.

Council Member Moore, I see your hand.

Great.

Thank you, Chair.

I, too, am going to be abstaining today.

I also have questions about several of the carry-forward items, which are rather big tickets.

I also want to get additional briefing on those particular ones, and potentially we'll be bringing forth amendment at full council, depending on the information that I receive during the briefing.

Thank you.

Thank you, and thank you for the advanced...

Understanding that this is going to be the course today, a note to departments, please make sure to provide briefings so that my colleagues can vote on bills.

And a reminder to my colleagues, we did have a amendment deadline earlier this week, and this information has been in council since April 24th.

So we are just so we're all clear.

It has been moved and seconded to recommend passage of Council Bill 12077 for any additional Council President.

I just have a question.

While you are, I will be going ahead and voting on this today, but I do recognize the validity of your questions.

And so could you please just get this question in the hopper when you talk to the mayor's office or the executive.

I do want to know more about what we're funding with participatory budgeting because that's a large chunk of money.

And I have expressed many times to the mayor's office that I want to make sure that that is one-time funding that is going to one-time expenses, and sometimes those expenses end up having continual expenses.

So, just for the record, October 26th, I did ask our liaison, Dan Nolte.

I've been given repeated assurances by you and OCR leadership that the $27 million participatory budgeting investment is one-time funding.

However, looking at the menu of items, people are currently ranking for inclusion in the package.

THE VAST MAJORITY WILL REQUIRE ONGOING FUNDING.

SO AND THEN I GO INTO TALK ABOUT OUR BUDGET GAP AND NOT WANTING TO BE COUNSEL TO BE HELD PUT IN THE POSITION OF HAVING TO TELL OUR COMMUNITY PARTNERS THAT THAT THAT WE HAVE TO CUT THEM OFF.

I JUST WANTED TO MAKE SURE THAT THERE WAS CLARITY.

SO JUST AS YOU ARE GOING FORWARD IN CONSIDERING WHETHER OR NOT YOU'LL DO AMENDMENTS, I DO would like to know more about these items that are in that package.

Thanks.

Wonderful.

I see Deputy Director Panucci and then Council Member Morales.

Thank you, Chair Strauss.

I'll just note that Central staff does have some additional information about these two programs that we've shared with based on specific council member questions.

We will also distribute that to all council members in advance.

In addition to receiving briefings from the departments, we will provide some additional detail, particularly around the equitable development initiative.

And I'll just note that Lish Whitson on our staff is staff's Equitable Development Initiative and Tommaso Johnson staffed participatory budgeting.

So they're also available to talk with you about those two programs.

Wonderful.

Council Member Morales.

Thank you, Chair.

I just want to make sure folks are clear that we did have a briefing in the Land Use Committee on March 6th, particularly from EDI.

So that information that was presented should be in Legistar still on the agenda that's posted.

So that is one place to begin for information.

And I can certainly encourage the department to reach out to council members.

Thank you.

Council Member Rivera.

I appreciate that council member Morales and you're bringing the department.

And because you did that, I actually had additional questions that I followed up with the department on.

And I, and my briefing was to address those particular questions.

So just underscore underscoring the importance of departments really answering questions.

I appreciate central staff and central staff has been very helpful in the questions that I've had.

And then I have additional questions.

that central staff does not have the answers to, and I don't expect them to.

So I do expect that the departments will be responsive to all of us when we are asking questions about the programs that we have, again, as I said earlier, committed to review.

And this does not mean that at the full council briefing, I won't be voting for these things, but I need to do my due diligence.

So I wanted to clarify that as well.

Thank you.

Wonderful.

Councilmember Suck and then Councilmember Wu.

Yeah, thank you, Mr. Chair.

I appreciate all the great comments and, you know, some concern or knowledge gaps and acknowledging those today and the due diligence from every last one of my colleagues here.

I share the sentiment and the need to better understand outcomes and results and performance of every single city program, including participatory budgeting.

And we'll be carefully scrutinizing that on a going forward basis, personally and amongst everything in this area.

in this budget year in particular.

But that said, I also think the city needs to honor commitments that it's already made.

And so, for example, with respect to participatory budgeting, I understand that the Duwamish Longhouse project was one of the high projects that the city already committed as part of that process.

And so me and my office are now coordinating with relevant city departments and agencies to make sure you know we live up to that and um and so in any event just want to want to flag you know i appreciate these comments and i also think we you know we need to honor whatever commitments we've already made as a city even if we didn't personally you know have a role in that thank you thank you councilmember soccer councilmember

Hi, thank you so much.

I, too, have a lot of questions about this and will be requesting additional information, but I also want to recognize, like, this is money that's been promised in the past, similar to what Councilmember Saka said, and so looking at these contracts from the past and how we fulfill them, but also looking at what do we need to do going forward is something I'm interested in.

So I will be voting today, but I will reach out and have some questions for you.

Thank you, Council Member Wu.

And the benefit here is that we have a little bit extra time before this comes to full council.

And so this will be at the May 28th full council meeting.

I am going to request that amendments are submitted by next Tuesday.

I'm going to pull up that date because we've already passed the original amendment date, which was the 6th, after the memo was sent out April 24th.

And so I'm requesting that amendments are submitted by May 21st.

That provides three, four business days and a weekend.

But please don't ask staff to work over the weekend.

That happens a lot during budget, and we're not in the budget session yet.

Any other comments?

It has been moved and seconded to pass Council Bill 120774. Seeing as we have no additional final comments, Clerk, will you please call the roll?

Council Member Saka.

Aye.

Council Member Wu.

Yes.

Council Member Hollingsworth.

Yes.

Council Member Kettle.

Aye.

Council Member Moore.

Abstain.

Council Member Morales.

Yes.

Council President Nelson.

Aye.

Council Member Rivera.

Aye.

Abstain.

And Chair Strauss?

Yes.

Seven in favor with two none opposed and two abstentions.

Thank you.

Council Bill 120774 passes and we'll move on to the May 28th full City Council meeting.

We are now going to move on to, thank you, colleagues, for getting through that.

It took a little bit longer, but the discussion was extremely relevant, and that's what we're here to do, and that's why we had these bills in the Select Committee instead of Finance Native Communities and Tribal Governments as we have had in the past.

So again, in typical years, we don't have, oh, please come, Tom.

In years past, we have not had the Select Budget Series like we are doing this year.

In years past, these types of bills would have gone through the Finance Committee.

These are part of the budget reforms I'm implementing this year.

Before we move into the next two presentations, I do want to provide the overview of the Select Budget Series, looking from the start to the finish.

reminding us that in April we received the updated economic forecast and had a presentation on the baseline budget overview, looking back 10 years, understanding our deficit and what our tools are.

In May, at the beginning of the month, we had the department budget overviews, a document that central staff has not created before.

and provides a lot of information for us doing a five-year look back department by department and by sectors within the budget.

Colleagues, I will be using this document to ask more questions as we continue on through this process.

And I recommend using it as a map to identify places that you want more information.

Today we will be looking at the general fund balancing analysis and then understanding the jumpstart payroll expense tax.

We'll move on to our June select budget committee where we will review the work of the revenue stabilization work group from last year and examine the other restricted revenue funds.

We will at the end of that presentation review our select budget series.

In July, we do have time held for a select budget committee if additional time is needed, although as we get into this transportation levy, I assume that our time will be limited, and I can guarantee you we are going to spend a lot of time on all of these questions this fall.

In August, we have another select budget committee where we will review the revenue forecast and begin preparing for the fall budget process.

This leads us to September where we will begin the fall budget process where all other committee work is ceased.

And so I will bring back up Director, BEN NOBLE'S MEMO ABOUT IF YOU HAVE LEGISLATION FROM YOUR DEPARTMENTS OR YOU HAVE LEGISLATION ON YOUR OWN, THERE ARE ONLY ABOUT 12 WEEKS LEFT BEFORE WE HAVE THE BUDGET CUTOFF, WHERE WE ARE JUST GOING TO BE IN THIS COMMITTEE FOR ABOUT THREE MONTHS, AND THAT'S GOING TO BE A LOT OF FUN.

ALL OF THAT SAID, WE'RE GOING TO MOVE ON TO THE FOURTH ITEM ON TODAY'S AGENDA, BRIEFING AND DISCUSSION ON A GENERAL FUND BALANCING ANALYSIS.

CLARK, COULD YOU READ THE SHORT TITLE UNTO THE RECORD, PLEASE?

Agenda item four, general fund balancing analysis for briefing and discussion.

Fantastic.

We are joined today by Tom Mikesell and Allie Panucci of Central Staff.

And I'm just going to turn it over to you, just understanding that this is a professional point in time analysis done.

And I think we all wish that we had more information.

And I know that you're doing a really great job of analysis with the information that you do have.

With that, over to you.

Thank you.

I think I forgot to introduce myself before I'm just, you all know who I am.

I'm Allie Panucci of your central staff, but for the record, that's who I am.

I'm mostly gonna turn this over to my colleague today, but I will probably jump in here and there.

Tom, and again, this today, this is really an update, a moment in time.

We have updated you all both in office and in April on the general fund balancing status.

And this is a routine update that we provide periodically throughout the year.

following revenue updates as well as other budget legislation.

And with that, I will turn it over to Tom.

And Tom, just before you get going, colleagues, we have 70 minutes left in this committee.

We have two presentations.

And I will say, as you have questions, let's have the discussion.

So don't hold your questions to the end.

Let's just ask them as you're having them.

Over to you, Tom.

Thank you, Chair Strauss.

Good morning, Chair, members of the Select Budget Committee, Tom Miksa with your central staff.

I'm here to discuss an update to the General Fund Financial Plan.

And so having said those words, the first question you have to ask is, wait a second, weren't you here a month ago talking about the General Fund?

And yes, indeed.

We were and we will continue to do so.

As noted by the chair, this is a routine update.

We have received new information and like any good planning process, when you receive good information, you update your assumptions and you see what the impact is on the plan.

So that's what we're going to do this morning.

So this next slide, this is as the update or the outline for the update, including kind of the technical approach that we take and kind of the information that you're going to receive at the end.

So first, we are going to look at updated estimates of the actual 2023 general fund revenues and expenditures and to see what the impact was on the ending fund balance for 23. which then carries forward into 24, and then input some new information about revised spending, revenue information from the forecast office and CBO that we received last month, and update how 24 looks, so how the general fund balance is in 24. And then take the new revenue information from the forecast office and CBO, including new inflation estimates, and then updated estimates to planning reserves based on recently settled labor contracts and see what the impact is on the out years as well.

So that's the order of business.

Next slide.

We will kind of start with some caveats to consider as you hear this information.

One is that this is not a central staff number per se.

We are using similar approaches that the city budget office uses when they develop these plans, which they do regularly during the year.

We do this work in collaboration with them, relying on information, including estimates to planning reserves and spending, and update the plans accordingly.

Next, these documents are plans.

They are not set in stone.

They represent current law to the extent that the current law is applied to some of these revenues and spending plans.

And then we...

But that being said, as being current law, it is subject to review and revision by city council.

So it's not a set in stone document, it's a planning document that is intended to be reviewed and then updated accordingly.

And then finally, the numbers will, as they've already evolved since April, they're gonna continue and evolve as we proceed through the year up to the budget process.

And I would just know, the reason we put these caveats in place is because at this point in the year, CBO and the mayor's office are just really getting deep into the deliberative process as they develop next year's budget.

They are collecting information from departments, they are hearing about cost pressures on existing programs and services, as well as requests for new spending to respond to needs in the community, many of which you all talk about here regularly.

And I say that to just note that we have continued to hear from the Budget Office that there are significant cost pressures, cost increases on some of our existing services.

And at this point in time, it wasn't...

the information was not reviewed enough or final enough to incorporate into this analysis, but it is just to say that we continue to see the same pattern that we presented last time.

Our revenues are somewhat treading water and our base services costs are continuing to increase.

And so this is a point in time, but I will just, I flag that as the executive has a hard couple of months ahead as they try to address the increasing costs of our base services.

So this is a moment in time.

And as Tom said, it reflects information we can validate today and based on inflation assumptions that we can verify today.

But there are other cost pressures that we expect to see.

And we'll have more information again in August and then when the budget comes.

Thank you.

That's very helpful.

I just want to confirm these caveats that you have before us today are not new to this year.

And in fact, I think we've gotten a little bit better with information sharing.

Is that is that correct?

Yeah, and this is not and it is just it is a yes, that is correct.

This slide, in fact, is repurposed from a presentation from last year, and it is just the pattern of how our budget process works.

And so it isn't a it is just noting that we have the council is always a little bit operating in a situation of asymmetrical access to information.

You get the full details when the budget is delivered.

So this is not unusual.

for the city's budget process.

Fantastic, thank you.

Great, so I'll just move to this next slide, and I'll just say we try to keep this at a high level, though there is some fairly complex financial information that we deliver in these types of presentations.

So to kind of bridge the gap, we will include in each one of these slides kind of a key takeaway, which we view as kind of the critical information that you should, that we hope that you learn from the slide.

So with that being said, This table in front of you is the actual adopted, the kind of financial parameters for the 2024 adopted budget.

So it starts from a, just kind of moving in the table from left to right, top to bottom.

Started 2023, had a starting balance of $361 million, revenues of 1.7 million, expenditures of 1.8, leading to an ending budgetary fund balance of $244 million.

That number then carries over to 2024, so it just, you know, the ending balance of 23 is the starting balance of 24. And then we had about $1.7 million of revenues programmed in the adopted budget, $1.7 million of expenditures with an ending budgetary fund balance of 220, and then planning reserves.

So these are the estimates that are not part of the adopted budget, but they are kind of set aside to ensure that we have appropriate levels of resources for things that are under development BEING PLANNED FOR.

AFTER ACCOUNTING FOR THOSE, WE HAD AN ENDING FUND BALANCE OF A LITTLE SHY OF $1 MILLION.

SO THAT WAS THE BOTTOM LINE NUMBER, THE ENDING UNRESERVED FUND BALANCE.

THAT'S WHAT WE USE AT THE CITY TO DETERMINE WHETHER THE BUDGET IS BALANCED OR NOT.

AND SO JUST THE KEY TAKEAWAY IS THE BALANCED BUDGET WAS STARTING FROM A BUDGET BALANCE OF $361 MILLION AT THE BEGINNING OF 23, ENDS WITH AN ENDING BALANCE OF $1 MILLION AT THE END OF 24.

Fantastic.

Council Member Saka.

Thank you, Mr. Chair.

Thank you.

So can you give a quick example, some examples, I guess, on a going forward basis for the planning reserves line item?

What kind of things would be covered there?

I think the city contract that was approved and with city employees and the police contract are two examples that If it wasn't included as part of this planning reserve, it should have been, but what else, I guess, on a going forward basis are kind of categories or types or examples of items that would be planned for ahead of time?

Sure, thank you for the question.

So while kind of the plan reserves are kept intentionally vague for a kind of strategic reason, in general, they do include things like judgment and claims costs, potential insurance increases, some kind of other kind of risk liability items that are not ripe to be yet included in the budget.

So those types of things.

The bulk of them is going to be the labor contract costs, however.

And how many...

Do we have any more pending negotiated agreements that we need to potentially vote on this year?

Or next?

Well, yes, and it is somewhat of a...

revolving door, right?

Because contracts end dates are staggered to some extent.

And so we can provide a list of other contracts that are open.

I don't have that off the top of my head.

And I will just note that these numbers, while those contracts have been approved, like just yesterday, all of your vote, was that yesterday?

Yeah, on the SPOG contract, the funds have not yet been appropriated.

So in this analysis, they still are in the planning And so until the appropriation bill follows, they are not yet in this year's budget.

And so I say that to suggest, because as you teed in on or keyed in on, we, the planning reserves are based on assumptions, and that is in part why they're in a planning reserve, because we don't yet know exactly what some of these things are going to cost.

And what we've seen recently is we, under the assumptions for some of the labor contracts, were not correct, which resulted in us being under-reserved for those things.

So anyways, that is a long way of saying we will get you an updated list of other outstanding contracts, and the planning reserve number also sort of changes periodically, and that is controlled by the executive at this point because it's not appropriated.

Thank you, curious to see that later.

But at a high level, it sounds like pending legal judgments and claims, and then labor contracts.

Those are the two main buckets of items.

Okay, thank you.

Good questions.

So now we'll move to some of the updates.

So...

kind of starting with the punchline first.

The 2023 ending balance to the general fund ended up higher than projected, approximately $164 million.

The reasons why include revenues that were $48 million below forecast.

But I would point out that the only reason revenues ended $48 million below is because there were $51 million of grants that we'd still expect to receive, but we did not receive them last year.

And they're actually part of the...

the, actually, no, that's not true.

They weren't part of the carry forward.

But they're part of the kind of automatic carry forward into 2024, and I'll cover that on the next slide.

So if you adjust for the impact of those carry forward grants, the revenues actually came in about $3 to $4 million above budget.

The larger item, though, is expenditures.

We're $212 million below budget.

just purely because of department spending below their appropriations in some cases.

However, consistent with the topic earlier in today's meeting, a big chunk of that is for unfinished business.

So programs and services that the city expects to do, but we're now going to plan to do them in 2024 instead of 2023. So a big chunk of that balance is then used to support those carry-forward appropriations.

So those are kind of the high-level reasons why we ended 2023, $164 million to the good.

And then that extra higher balance then carries forward to 2024, and we'll now cover on the next slide what the, how the kind of the flow of funds goes for 2024 when we apply updates to that year as well.

Thank you.

Tom, before we move on, you've got a great key takeaway there.

Can you explain that in a little bit more detail?

I also see that on Seattle Channel, the captions are covering your key takeaway.

And so if you could raise that up and share a little bit more detail, that'd be helpful.

Sure, absolutely, Mr., Chair Strauss.

So the key takeaway is that the 2023 budgetary ending balance increased from $244 million to $408 million.

So that means that the starting point for 2024 budget is higher than the level that was assumed when the council adopted the budget in November of last year.

Fantastic.

Oh, not great, but thank you for that helpful feedback.

Can you help us understand why that's happening?

Just one more level of detail below.

Sure.

Essentially, we planned for a higher level of spending in 2023 than actually occurred.

So the funds that we had, the amount of money that we had planned to spend was lower than what we actually spent.

And at the same time, the amount of revenue that we had planned for was lower.

So the net effect is $164 million.

Fantastic, now we're saying fantastic.

Thank you, Tom, very well.

Continue on.

Okay, so now we'll take that extra $164 million and plug it into the budget plan for 2024. So that's starting from good news.

However, the underlying base general fund forecast actually declined based on information from CBO and the forecast office we received last month, declined by $7 million.

And that's after adjusting for carry forward grants.

So if you look at the information provided by the forecast office, It would include the $51 million of grants, but that's just moving money from one year to the next.

So if you net that out, it's actually a $7 million general fund baseline revenue decrease.

And then also, projected spending increased, and again, this is net of the Carry Forward grants, increased by $128 million.

And that is the result of automatic Carry Forwards, so things like encumbrances and capital, which automatically goes from one year to the next, and administrative items, as well as assuming the adoption of the Carry Forward bill that was passed out of committee this morning.

I'm sorry to interrupt, but you said that so the projected spending...

Council President, can you make sure to just raise your hand?

Thank you.

I was about to, and then he was looking right at me, and so I felt like I should start talking, but thank you.

If it was projected then, but we already knew basically what the carry-forwards were going to be, but it seems as though there was something unexpected in that, in the carry-forward that we are, because it increased by that amount.

So what was the unexpected part in there?

Thank you for the question, Council President.

So if I said unexpected, it's because the expectation is that we would have spent all of the prior year budget in 2023, however, we did not.

And some of that is just underspend budget that lapses to the balance, and some of that is business that we expect to continue into the next year.

So that's the unexpected piece.

We expected carry-forwards to be zero when the budget was adopted.

However, they're more on the order of 125 million or so.

Okay, thank you very much.

Fantastic.

Any other questions?

I need to stop saying fantastic.

tom i'm going to let you finish this slide and then i've got a couple questions okay um so then moving to the third bullet um so this is the where based on these contracts that have been recently settled the city budget office has increased the planning reserve estimate in 2024 by 42 million dollars and so that's the um kind of uh um updating those planning estimates um kind of below the line to to kind of size up the budget and the general fund to be prepared to pay those estimates.

Though as Deputy Director Panucci indicated, these are just estimates right now as we will receive legislation to actually spend the money and to put the salary budgets in the departments to pay for the contract costs, there will be a process of resizing what the overall need is.

And that's kind of, you know, larger, kind of a larger comment to the entire process is, you know, as we move from estimates into actuals, the numbers will change, hopefully for the better, but possibly for the worse.

But there's always kind of, right now, we're still in the planning phase on these amounts, and then you will see bills and that we'll spend money from those planning estimates, and they will resize accordingly.

Thank you, Tom.

Can you just, again, with your key takeaway, summarize and give one more layer below of detail?

Absolutely.

And then finally, and then I will loop in kind of the ultimate key takeaway.

And the ultimate key takeaway is that though, The fund balance was higher to start the year based on how last year ended.

Baseline revenues are $7 million lower.

Spending, appropriated spending, is $128 million higher.

Planned spending, largely driven by increased contract costs, is up $42 million.

The net result is that the The preliminary assumed ending balance for the general fund of $1 million is now an estimated negative $12 million, which would indicate the budget is out of balance.

Having said that, I would point out that this number doesn't include any impact from the executive's hiring freeze that was announced, and the point of the hiring freeze was in anticipation of these higher contract costs.

So, you know, I wouldn't get too focused on the $12 million.

It is a number.

It's a point in time, as the chair indicated.

And then there's more information to come.

I'm just telling you the numbers based on the information we have right now.

So that's it.

That's the key takeaway is that the, you know, building all this new information into the plan based on this point in time analysis, the ending unreserved fund balance of the general fund is $12 million.

thank you and council members talk i see i'm going to ask two questions here can you help us understand the planning reserves and how that functions in our budget above and below lines the comparison contrast with our emergency fund and our rainy day fund and how the planning reserves interact with a balanced budget yes absolutely fantastic question um so

We have what we call the fiscal reserves, which are the emergency fund and the rainy day fund.

So the emergency fund is for unanticipated spending on emergencies.

And it's set by, is there like a 2016 base value regularly inflated by CPI?

Best case scenario is we never use it, because we just have money that we've set aside in a separate fund.

and we don't tap it.

We did tap it during the pandemic and are in the process of replenishing that.

Similarly, the Revenue Stabilization Fund is in the budget, I think 5% of general fund tax revenues.

And that is set aside in cases where revenues come in below forecast due to economic circumstances.

Similarly, we tapped the Revenue Stabilization Fund during the pandemic as well.

It's also in a separate fund.

So those are two kind of contingency funds that we set a case in case we need them.

But hopefully we never do.

But, you know, circumstances often come where we do have to tap them.

But that's the point of them is that they are contingency.

They're there in case we need them.

In contrast, the planning reserves are a...

a number used in sizing the budget that is managed by the executive to ensure that the amount of revenue that we have will be sufficient to cover all of our appropriated and our planned costs.

So the planning reserves could very easily be part of the appropriated budget.

And in some cities, those items are.

It's really just a matter of making an estimate, in anticipation of costs that we do anticipate having.

So in contrast to those other fiscal reserves, which are kind of contingencies, these are things that we do expect to spend money on.

Perhaps we don't know exactly what the final value would be, but we do plan to spend that money.

We want to make sure we have enough money when the time comes to make those payments.

So I would just add like a key distinction between the fiscal reserves that Tom described and the planning reserves.

So the fiscal reserves are appropriated.

They are part of the annual budget that is adopted legally.

The planning reserves are not.

They are essentially fund balance where we are saying there is a plan to have to spend this, but it is not actually appropriated.

And so what that means is legally, we don't have to balance technically with those planning reserve numbers in because they're not appropriated.

However, we do balance with those numbers because we expect to have to spend that money in any given year.

And so it is a...

sometimes a challenge for the council that those funds are not appropriated, but it is how the city has managed those future...

things like labor contracts and that sort of thing for many, many years, I think at least 10. We can find out when the last time the planning reserves were appropriate, but that is a key distinction.

Legally, we don't have to balance to a plan that's not appropriated, but we do.

And had we not, for example, balanced this year with those planning reserves in mind, we would have been in a even more difficult position if those funds had been appropriated for other things and then you had to pay you know, the full freight of the SPOG contract, for example, without anything held in reserves.

Thank you.

Very helpful.

Council Member Saka.

Thank you, Mr. Chair.

Two questions.

I guess I'll start with a question that just percolated in my mind and resulting that great question.

So before I lose my train of thought, so appreciate the clarity on the on the, you know, the fiscal reserve versus the planning reserve.

And I guess my first part one of this question here is, under the fiscal reserve construct, is the emergency fund and the rainy day fund governed by a Washington state law or regulation, or is that solely within the city's purview to control and regulate and determine amounts and processes and things like that?

Thank you for the question, Council Member Saka.

So the emergency fund and the revenue stabilization fund both have kind of presence in state law, but we set the parameters for those, for how much to set aside in those funds.

And in fact, the emergency fund statute in state law is, interestingly enough, what gives us the ability to spend money outside the regular budget process.

So it's kind of the, in the event of unforeseen needs to make expenditures, and this is kind of what, essentially what state law says, in the need to make unforeseen expenditures, the city can use the emergency fund or any other fund, and we often just use the any other fund in those circumstances.

But that's...

Those are kind of the guiding rules.

They are present in state law, but we set the rates.

Thank you.

So, you know, my initial impression based off of that feedback is that, you know, the emergency fund sounds like we don't typically leverage that.

There's exceptions during COVID amongst other things, but the rainy day fund sounds like we do...

leverage those set aside funds on a regular kind of routine basis.

And so one in my mind that strikes me as an opportunity on a going forward basis to better put some tighter parameters and controls around the use of that and including cap amounts, limits, whatever it is.

And then also for understanding the trends, of how and when those specific funds in that bucket are leveraged.

I will want to understand which specific programs and what are those funds being used for?

And in my mind, a rainy day fund, whether or not that's the proper technical term for it, but that is the term you offered for this example, it should very rarely be used and leveraged.

And if we're leveraging on a routine, consistent basis, there might be an opportunity for better, implementing better controls, including more spending discipline.

But on the, so my next question relates to planning reserve.

So you mentioned that we don't appropriate that as part of our budget, but other cities do, some other cities.

And so I guess I will wanna better understand the pros and cons of that approach.

There's trade offs with everything, but like what are the pros and cons of appropriating our planning reserve?

Um, so I mean, the few pros and cons of appropriating versus not appropriating is that, um, you have greater transparency when it's part of the appropriated budget.

It's more clearly presented what the total spending, because often what's referred to when the budget is referenced, for example, the $7.8 billion budget that you hear about, about this total city 24 budget, that doesn't include planning reserves.

So if the planning reserves were included, then it would be kind of a more accurate representation of what the total budget is for that year.

The downside is more transparency removes flexibility, largely for the executive, but also for counsel.

So that's kind of a high-level trade-off.

There are certainly others, and we'll follow up with what those would entail.

how does it remove flexibility if you make reasonable assumptions, like for the council or the executive, if you make reasonable assumptions up front based off of known factors, that's all you can do.

Historically, we have this amount of legal judgments and claims that we pay out every year.

And we know that these labor agreements are coming up for negotiation and like, or renewals.

And like, I guess I don't understand how that materially impacts and impedes flexibility in practice.

But in any event, a topic I think we'll want to, colleagues, further explore if we're truly going to make some reforms that work for everyone.

My next question, hopefully it'll be a little more straightforward, but so you aptly pointed out that the $12 million decrease in the takeaway portion of that slide there does not.

So it's mentioned on the slide and you also verbally mentioned it.

So thank you that it does not include impacts of the hiring freeze from the city and the actual mid-year legislation, which begs the question, When can we expect more clarity around that, particularly with respect to the impacts of the city hiring freeze?

Yeah, so right now the estimate that we and the budget office are working on is that the hiring freeze as applied to the general fund will result in about $20 million of savings.

CBO is looking at those numbers now and they're preparing legislation that will should be transmitted in late June, and it will be discussed in committee in July and August.

Those are the mid-year budget bills.

So at that point, we will have better clarity on how much at that mid-year point departments think they can absorb.

Essentially, like they have spent less in the first half of the year than they had planned in part due to the hiring freeze and some holds on contracts and that sort of thing.

And so we expect and hope that that will mean that the council is not asked to appropriate the full amount of the costs of those contracts for this year and retroactively, so we don't end the year in the red.

So that timeline is about late June.

And I'll just take this opportunity to say the first briefing on the mid-year bills will be in the finance committee in July.

but the vote will be in the budget committee in August.

And so I just invite you all to either attend the finance committee in July, because I believe the chair has made that an open invitation, and or request a briefing from central staff in mid July on that bill, because you will be asked to vote on it in early August.

Thank you.

Any further questions?

Not seeing any.

Council Member Moore, did you still have a question?

No, thank you.

Council Member Morales.

Oh, thank you.

I want to go back to the planning reserves issue, and I think it goes back to what Allie was saying about...

us having asymmetrical information because those funds aren't appropriated.

But you also mentioned that there was a time when they were appropriated, so I'd be interested in understanding what that was, why they were appropriated, and if there had been a pattern of appropriating at some point and we switched for some reason.

I understand the issue of using that sort of opaqueness to protect us in some contract negotiations.

But when we're in this sort of financial situation, I think it'd be really helpful to have clarity and transparency about what reserve, what funding we actually have available to us.

Yeah, thank you.

Sorry for the aside.

Tom and I were just chatting.

This is clearly an area that we will put together some additional materials.

So look forward to a central staff memo in an inbox near you sometime in the coming weeks about planning reserves, some of the trade-offs, and what we know about how other jurisdictions handle it.

And I will say it is a mix.

Some appropriate, some don't, but provide a little bit more detail about what the assumptions are that are embedded.

And then that will be something for all of your consideration as you take up the next year's budget in the fall.

Sorry to spin up more work, but I appreciate you.

Thank you.

Job security.

Any further questions on this slide?

Back to you, Tom and Allie.

Thank you, Chair.

So now, we'll move.

So that concludes the kind of...

Words around the adjustments.

This is the kind of new table.

So we started with looking at what the table of balancing looked like with the adopted budget.

So this now table just updates those numbers with the revised estimates that we have at our hands, at our fingertips now.

And so the key takeaway is that although 2023 ended with a higher balance than what was expected when the budget was adopted last fall, lower revenue forecasts and higher spending estimates in 2024 actually make the projected 2024 ending on reserve balance negative, about negative $12 million, as you can see in the table.

I think we've asked all the questions here, please.

And so I'll just conclude with the next couple of slides, just kind of taking the plan a bit farther out.

When we do this process, which is required by city code, so every time we receive a forecast update, we update the plan, we update kind of the prior year actual, the current year budget, and then three years out.

And so now we're gonna cover the three years out, 2025 through 2027. And so at very high level, the forecast that we received from the forecast office in CBO in April gave us some minor good news in 2025, about $3 million extra general fund revenue.

But by 2027, it was actually $24 million higher.

So that's, I mean, that's really good news.

So help is on the way, perhaps not coming soon enough based on the numbers we recently received.

Inflation, fortunately, in that forecast, in 2025, the inflation estimate was essentially the same, 3%.

Slide increases in 26 and 27 is about 40 basis points by 2027. So not a lot of additional pressure there.

And then third, and this may not be satisfying, but the one element of the plan that was increasing was in those planning reserves.

In 2025, it increased by about $20 million, and then in 2027, increased by $30 million.

So the net impact of all of those adjustments, which is some minor increase in revenues in the near term with more substantial increases in the out years, more than offset by increases in costs led to adjustment to the planning reserves.

And so if you look at the next graph, which updates the graph that we looked at last month with this new information, you can see that the 2025 projected deficit has now grown to $258 million based on this updated information.

And clarifying question here, this does not include, does this or does this not include any of the jumpstart funds that we have used in years past?

Not looking forward, looking retroactively.

It does include jumpstart funds in 2023 and in 2024, not in 2025 and beyond, consistent with current law.

And it only includes the portion of the jumpstart funds that were authorized for general fund balancing.

It's not the full.

So everything that was reserved for the spending categories is in a separate fund.

Both the expenditures and revenues are assumed there.

And is that why in the 2024 revised, we have revenues below expenditures and a balanced budget?

The reason for the difference between revenues being lower than expenditures is because we are using fund balance to support that spending in 2024. And in 2025, there is no fund balance available.

So that is to say, if you're looking at the 24 line, the difference between the 1.9 million on the orange line and the 1.7 million on the blue line, that gap is closed and balanced using fund balance.

The revenue line, the 1.7 line, I believe includes the jumpstart transfer in terms of revenues.

You see the line dip in 25, the blue line dip a little bit in 25, because this is based on current law, we assume, no transfer from the Jump Start Fund, and we assume no fund balance left to use, given the update that Tom just walked you through.

Thank you.

And this will tie into the next presentation, which we may or may not get to today, colleagues, that every year, since we have passed the Jump Start payroll expense tax, we have asked ourselves a series of questions, which you will see enumerated in a transparent fashion in the next presentation, those questions that are asked every year are the dip from 17, that you see from 24 to 25. I know I did ask previously that we start putting the date next to the figure.

And if you could just keep it right next to the figure, because colleagues, I think you are all recognizing that we have had points where this number has gone down.

We've had today points where this number has gone up.

This is a dynamic number because we are estimating the future, right?

Projecting into the future.

Council Member Moore.

Thank you.

I know this is premature, but since you brought up the jumpstart, so the 2025, that includes no jumpstart money or no money over the base amount of jumpstart that we've been supplementing to date?

from council member moore the 20 25 number in the general fund includes no support from jumpstart and it doesn't include support from jumpstart 26 and 27 either and that's just consistent with the the flexi funds flexibility ordinance which made a temporary transfer in 23 and 24.

Okay, so zero jumpstart money, not, yeah.

Great, if the jumpstart fund policies are not amended, zero jumpstart dollars are expected to be transferred to the general fund from the jumpstart fund in 25 and beyond.

That's current law.

But even before, I mean, even when we had set categories for the money, we were still giving some money.

From the beginning, we've been supplementing the general fund with Jumpstart.

It's just the amount that we've been supplementing has changed.

Is that correct?

Yeah, and the next presentation sort of walks through how each year the policies have been amended to address the projected...

general fund deficit, they have been one or two time allowances.

And so as chair Strauss indicated, it is a series of questions that the council has grappled with each year, because frankly, but for the jumpstart fund, the last several years of budgeting would have been very, very difficult.

So the council has made one or two year decisions about some use of the Jumpstart Fund to balance.

And those same questions are going to be before you all in this year's budget deliberations.

Thank you.

Thank you.

Colleagues, any other questions on this slide?

Moving on.

So the penultimate slide of the presentation.

So these are just the kind of key takeaways for this entire presentation.

Due to settled labor contracts exceeding planning estimates, the revised 24 ending in reserve balance is now predicted to be negative.

However, as previously noted, that does not include the impacts of actual mid-year appropriations, which may be different than the estimates, and also the impacts of the salary savings put in place at the beginning of the year from the hiring freeze.

And then the ongoing projected general fund gap has grown to $258 million in 2025, kind of consistent with similar dynamics.

The executive is continuing to revise the 24 budget and then prepare the 2025 budget which will inform the changes to the financial plan that we'll receive in August.

the mayor's ultimate 25 26 proposed budget and then an updated financial plan will be transmitted with the proposed budget and then maybe if you look at the next slide we'll kind of talk about the the kind of the general fund financial plan path um so in august we'll receive a um or the committee will receive a an updated forecast of revenues and and economic indicators from cbo and the forecast office and then the mayor will then submit on his proposed budget for 25 26 based on on that and department submitted information.

We'll review that general fund, that financial plan at that time.

Also, and during the process, the forecast office will provide an update to revenues, which is consistent with past practice.

And we'll update kind of what the impact is of that.

And then finally, we'll provide the kind of impact of the ultimate balancing status after the budget is adopted.

Thank you.

Councilmember Kettle.

Thank you, Chair Strauss.

First, I wanted to say this was a fantastic briefing.

I really appreciate it.

Ms. Pannucci and Mr. Mikesell, it was indeed fantastic.

There's also a reminder to me going through it.

One theme that's come to me is continually on the public safety front, last year, this year, I've always talked about leading with compassion, but then also bringing the wisdom piece into this.

And This briefing is, I've transferred that to the budget process, and we have to think this way.

You know, the discussion about the emergency fund, the stabilization fund, and all these pieces that, you know, we have to have the wisdom pieces because if they didn't take the right steps after the Great Recession, we would not have been ready for the pandemic.

If we don't take the right steps after the pandemic, we won't be ready for the next thing.

And so I definitely believe in the compassion piece in terms of across all the areas that we cover, but the wisdom piece as a budget finance slash budget committee really needs to be at the forefront.

So thank you very much for this, again, fantastic briefing.

I'll add that this is a robust presentation.

Colleagues, any other questions?

For simplicity and education, there are appendix slides to this that go into another layer of detail we wanted to provide.

And thank you, Tom, for providing high level during the presentation.

There are many, we could spend days going into this.

And so I also, I apologize, Tom, in advance, I offer Tom is available to walk you through a lot of this information at any time.

That concludes that.

Thank you, Chair.

That concludes the item for the general fund.

I think now we'll move to the jumpstart fund.

Wonderful.

Seeing as we are at 11.06, I do start my committees on time and I end them on time to the best of my abilities.

We'll take this up right now and if we have additional questions, I might ask that we take that to our next select budget committee in June.

As Clerk, could you read the short title of our next presentation into the record?

Agenda item five, jumpstart payroll expense tax fund for briefing and discussion.

Thank you.

I'll give you the high level and then I'll turn it over to Deputy Director and Tom.

These are questions that we've asked every single year since we've had this tax.

This has been in place since 2020. this this has been in place since 2020 i believe that i was well i know that i was one of the four original co-sponsors to this bill councilmember morales was also a co-sponsor to this bill if because sales tax had an unexpected drop in the fall and because real estate excise tax still has not rebounded if we did not have jumpstart we would be in the financial hole today not next year we would have already had to cut services and lay off staff today, not tomorrow, without the jumpstart tax.

Within there, you will see some questions.

These are questions that are asked every year.

And at this point, I will turn it over to Tom and Ali.

And I really appreciate the background that brings us to today within this presentation.

Over to you.

Thank you.

I'm going to just jump into the outline here today.

I'm going to walk through some of the legislative background that we've alluded to a bit already today, provide some context on how the funds have been spent over the first few years that this tax revenue has been in place, and provide a little bit more detail about what is in the 2024 budget.

budget just to give you a sense of where things are today and then tee up some key policy questions.

I've also provided a list of initialisms that I've used throughout the presentation just to save space on the slides.

But if I am using them in my oral presentation and I'm moving too quickly, please just slow me down.

And I'm happy to define terms along the way.

So this slide just highlights what we were just discussing a bit.

The jumpstart tax was established in 2020 for implementation in 2021. That was through three pieces of legislation, two ordinances and one resolution.

One ordinance established the tax to be in effect for 20 years for specific purposes.

And so that allowed the city to begin collecting taxes in 2021. And then the ordinance 126109 and resolution 31957 is what established the spending plan or what you often hear us refer to as the spending categories.

And in that initial legislation, it laid out how those funds would be spent and I'll provide some additional detail on the next slide.

Then in July of 2020, we frankly did not anticipate that the pandemic and the impacts of that pandemic would persist for so long.

And so that informed that year's spending plan.

In 2021, as you all lived through, we were still deep in the pandemic and we're continuing to see issues with our general fund revenues.

So in that year, the council established a separate fund for Jumpstart revenues and updated the spending policies a bit to provide some flexibility to allow funds from the Jumpstart fund to be used to balance the general fund if revenues continued to come in below pre-pandemic levels.

So that allowed some funds for the 22 adopted budget to help balance the general fund.

And then in fall of 21, as the council was considering a budget for...

Sorry, in 2022. Yeah, when council was considering a budget for years 23 and 24, we can continue to project an issue in the general fund.

And so that was when council adopted what we refer to as the fund flexibility ordinance that allowed some use of the jumpstart fund to balance the general fund in the 23 and 24 biennium.

That is what expires at the end of this year.

And so if not changed, no funds would be transferred to the general fund.

This slide outlines sort of how those policies and policy changes were implemented.

So in year one, the spending plan said all funds from the Jump Start tax would be used for COVID relief and recovery efforts and general fund balancing to avoid service reduction.

So in the first year of the tax, all revenues were deposited into the general fund and were used for a variety of purposes to help avoid service reductions and address the COVID.

the impacts of the COVID pandemic.

In year two, following an update to the policies, $85 million of Jumpstart funds was used for general fund balancing and the remainder was allocated about 150 million to the Jumpstart spending categories.

And I've just listed how that breaks down here and we'll talk more about each category in a few minutes.

And then in 23 and 24, council passed the fund flexibility ordinance.

That is really where we established the policy to look at the jumpstart funds, look at how revenues were estimated to come in when the council was first adopting the tax in 2020 and how they've actually been performing.

And what we saw was a upward trend that the jumpstart tax revenues have been coming in higher than what we had assumed.

in 2020. So when we made the estimate in 2020 for what we thought might come in in the year 23, that estimate was lower.

And so the council's policy choice at that time was to say, any amount of jumpstart revenues that came in above the 2020 estimates can be used for general fund balancing.

Everything else is reserved for the spending categories based on those commitments.

And then I'll just know in 24, the council passed a bill to increase the jumpstart tax rates to generate additional $20 million annually to be used to improve mental health outcomes at seattle public schools so that 20 million dollars was appropriated to the department of education and early learning in the 24 adopted budget but in order to fully expend those funds there does need to be an update to the fund policies thank you and ali as we transition into the the next section of your presentation if we reach 11 20 i'll ask that we jump to the key policy questions Great, and I will be pretty quick then on these next slides, but I am happy to talk with any of you in office or come back for a future presentation to go into more details about the actual spending.

And so at a high level, housing and services, 62% of Jumpstart funds are, allocated to housing and services.

That includes investments in building new affordable rental and homeownership units, as well as providing ongoing operating maintenance and service resources to support existing units in 20 in the 2024 adopted budget that meant 141 million dollars being allocated for these purposes the bulk goes to the office of housing that is used to invest in the programs they provide and then a small amount to the department of construction and inspections to expand funding for organizations that provide eviction legal defense and specifically to provide a resource for um organizations working with tenants to cure those evictions by paying their back rent.

On the right side, I just highlight that, you know, this is but one fund source to the Office of Housing that is used to, is braided with other fund sources to support implementation and the building of new affordable housing units.

And it is their most flexible source so that, for example, if, If there is a need to increase funding for operating and maintenance at existing affordable housing units, they can year to year make some adjustments on how those funds are allocated.

The second category is economic revitalization.

That, Funding supports programs and services that's distributed across 12 different city departments with the majority about 75% supporting the work of the Office of Economic Development.

Throughout these slides, you'll see OT or OG next to many of the figures.

That is indicating whether or not those appropriations were added as a one-time expenditure, meaning we don't necessarily expect to see them come through in next year's budget or whether they were intended to support ongoing operations.

I flagged that because the bulk of the investments in the 23 and 24 budget for this category were one time.

And I have a footnote on the slide, but that was really because there was work to develop a long-term strategy about the best use of these funds, the future of Seattle economy strategies.

That was adopted in 23, that policy.

And so we do expect that many of the items that were added as one time in the Office of Economic Development, for example, will likely be proposed as ongoing investments.

But again, that will be a policy choice for all of you.

So I won't go through all of these, expands two slides.

I'm just gonna note that there is an error, a copy and paste mistake on this slide on the top right, the $675,000.

to the Office of Arts and Culture should be described as funding to support improvements to the pedestrian environment that integrate with the Seattle Storm Center for basketball performance in the Inner Bay neighborhood.

I just duplicated the description below, so.

Thank you for that clarification.

And for the record, Seattle Storm, the winningest team in Seattle's history.

So home opener last night.

Okay, and then again, happy to talk about any of these details.

And I will just know, I've tried to describe where there are bigger buckets of funding, how they're allocated across departments.

There are some smaller ads, so it doesn't necessarily add up exactly.

And again, I'm happy to walk you through that in office at a future date.

The third category is the Green New Deal.

There's about $20.3 million authorized in the 24 budget.

The bulk of that goes to support the work of the Office of Sustainability and Environment.

With a small portion going to the Office of Housing, they have a program that helps low-income homeowners with weatherization, and specifically in this case, helping convert homes from oil heat to an electric heat pump.

And then some funding to the Department of Finance and Administrative Services that is supporting debt service on some programs to electrify our fleet and improve our work there.

And then the fourth main category is investments in the Equitable Development Initiative, $20 million to the Office of Planning and Community Development in 2024. This supports grants to community-based organizations working on anti-displacement strategies.

On the right there, I have just highlighted and described the ongoing funding for EDI is 25 million.

So jumpstart funds make up the bulk of that with some additional funding coming from the short-term rental tax and community development block grant funds.

And I didn't create a slide on administration.

That's the final category.

That funding supports the sort of back of house function.

So there are staff in the office of human resources, in the budget office, your own central staff, and some of all of your time, that sort of thing that allows the city to implement and get that money out the door.

So that is a less exciting slide to develop.

Allie, I have to say, this is the best summary I've seen in the last three or four years since this tax has been in place.

So very clear and concise.

I really appreciate it.

And you even got to the key takeaways at 11.19 a.m.

Thank you.

I can talk fast if you tell me to.

Okay, so the key policy question is really, should the jumpstart tax continue to be used to help address the projected deficit?

As Chair Strauss described, we've been asking that question of council since 2020.

And Allie, I will say the answer has been in the past.

The answer has been yes.

And then it's not just a blanket yes.

The answer is then yes, absolutely.

and or yes, but, yes, if.

And so colleagues, I also ask you to reserve judgment on a lot of this information until we get closer to the fall, because as we have the economic forecast that comes in, as we have these additional savings coming in, the answers to each of these questions change in a dynamic fashion, just as I've asked for the date to be included on the projected revenue whole.

everything here is dynamic.

And I wanted to make sure that you knew that these questions were asked every year so that you yourself can begin asking these questions.

Yeah, and I'll just add to that.

So we ask these questions at this point, not for you all to come to a decision, but it will be an ongoing conversation.

Until you see the full context of other trade-offs in the budget, you might not know exactly where you stand.

Like you may think, you want to fully protect all of the funds for the initial categories, but that may, your thinking might be it changed if that results in cuts in other parts of the general fund budget that are also critical or priorities for you.

And so that is to say, This will be an ongoing discussion throughout the year.

It's helpful for you to start getting a general sense of where you stand and what your priorities are, but it will be a complicated braiding of trade-offs between what is currently funding by the Jumpstart Fund and what is currently funded by the General Fund and how we balance the two for the next biennium and into future years.

And so with that, you know, as chair, oh, go ahead.

Thank you, Ali.

And I am seeing, I've got a couple colleagues with their hands up.

I don't know who went, well, actually Zoom tells me who went first.

And after this, we continue talking about you know, jumpstart, how we have the projected revenue, all of that.

And I might say that we can roll that into the restricted revenue conversation for June 5th.

Colleagues, this is a restricted revenue, as are the restricted revenues we will have in committee on June 5th.

This just happens to be the biggest and the newest.

So with that, Council Member Saka, Rivera, and then Kettle.

Thank you, Mr. Chair.

Thank you for this.

Yeah, definitely a restricted revenue source, but as we've seen historically, it hasn't necessarily been treated as such, and based off of specific policy decisions.

But can we, I would love to just better understand when Jumpstart was originally passed, It is, again, a restricted source, but I think it's a, well, that's the original intent.

We'll have to kind of level set and better understand what specific purpose and goal and programs was Jumpstart intended to fund?

The original, like, when it was originally passed.

When it was passed in July of 2020, it was passed intentionally to provide funding in 2021 to address COVID response and recovery.

And for all future years to be...

allocated to for investments in affordable housing economic revitalization green new deal investments and the equitable development initiative with a small amount set aside for administration so that was the original purpose and i will say that all of the policy changes have been consistent with that original intent it's just the circumstances have changed and so as you know these questions in front of you are today are the same ones that the previous councils have had to grapple with year over year.

How do we stay true to the commitments that many of them adopted or sponsored in 2020 and also avoid service impacts for things that have previously been funded by the general fund.

And all of this is on the table for your consideration.

So what was the, As I understand it, affordable housing was the sort of biggest category, commanded the highest share of that spending or that revenue.

What was that breakdown, do you know, originally?

It's the same percentages, 62% to housing and so forth.

And at that time, we did some modeling on what we thought it would produce, but it was based on low inflation and much lower income.

much lower costs so at that time i think i was modeling an assumption that a unit of affordable housing was would cost about 350 or 360 000 all in and the current estimate on the per unit cost is more like 565 $5,000 per unit.

So a lot has changed context wise, but yes, the bulk was to affordable housing, 62%, nine to green new deal and 9% to EDI and 15% to economic revitalization.

Yeah.

No, that's great to know.

And, and understanding the history of like how we've granted, you know, limited one-time exceptions and, and over time and, you know, those are the policy decisions that were, that were made at the time.

And so, you know, every year we're going to be confronted with this, but I also think, you know, it makes sense to, to, um, sort of more truly live up to the original, uh, goal and, and, and intent of jumpstart, uh, and, and be a little more thoughtful and deliberative about, you know, the impact of our, of our spend and performance and making sure we consolidate where appropriate and carefully weigh expansion of new programs and for net new investments fund things that we know to be functioning and working and achieving results.

But if we keep, if the answer is always parentally yes, like when and why and how would we, ever be able to make a difficult and arguably necessary policy decision on what is the appropriate amount.

And if we had not leveraged Jumpstart in subsequent years to balance the general fund or address the general fund deficit, what more could we do for affordable housing, for example, or some of these other kind of huge categories of important consequential categories.

So I think in my mind, over time, I don't know when that time is, but over time, draw down those exceptions.

Because if everything is important, nothing is important.

If everything is a priority, nothing is a priority.

If everything is a one-time deal, one exception, Who are we fooling?

Let's have an open, honest, candid, frank conversation and be transparent about what's going on here.

But anyways, in my mind, at a certain point, whenever that is, we need to better and more truly live up to the original goals and intent of Jumpstart.

lower our dependency on using to cover the general fund deficit.

And again, I don't know when that is, but uncomfortable conversations are upon us.

So thank you.

Thank you, Council Member Saka.

Seeing as we have three minutes and four additional council members in the queue, I am going to ask us to run a few minutes over right now.

So I will begin wrapping us up at 1140. I have a hard stop at 1145. And so if we are in the middle of a discussion at 1145, I'm gonna close the meeting in the middle of that discussion.

I will.

Councilmember Saka, those were really good questions.

I wanna bring a little historical context to housing, affordable housing funding.

I'm doing this off the top of my head.

So please, if I'm wrong, I'm wrong.

Give me grace.

2016-2017, McKinstry did a report about how much funding the City of Seattle and King County needed to be providing to affordable housing to get us out of the affordable housing deficit that we were in.

At that time, the figure was $200 million.

It was not until 2020, the budget in 2020 for 21, that we funded affordable housing above $200 million.

$200 million.

And so that report from 2016 to 2020, we were not doing our job.

Since 2021, we have been doing our job.

And every year we have seen us meet historic levels for affordable housing.

That said, the context that I'll give you is the St. Luke's Affordable Housing Project that I spoke about in briefing that is breaking ground this Friday.

received funds from the NOFA in 2021, I believe.

And so those funds were directly tied to Jumpstart.

And so when we look at how long it takes to get these dollars on the ground, making a difference, those family sized units, two and three bedroom units that are breaking ground this week still won't be actualized for a few years.

And that's the importance of having the long range of funding for affordable housing.

Thank you for letting me interject.

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

Thank you, Chair.

I just want to confirm that since 2021 and 2021, we used it for COVID emergency response.

In 2022 until now, we have used Jump Start in the percentages that were originally legislated by the ordinance, like the 62, et cetera.

Yep, that's correct.

The main difference between 22 and then 23 and 24 is in 22, we used more for the general fund than we would have projected in 2020. But yes, anything that like 150 million in 2021 was allocated percent wise, and those percentages have not been modified since the original.

So it's the overage.

Council Member Rivera, could you speak into your mic?

Oh, sorry.

It's the overage that has gone into the general fund.

So we have funded all the things that were originally legislated to that percentage.

And then the overage, we didn't know there would be overage of Jump Start, is what has been used to deal with the general fund deficit.

For 23 and 24, it's the overage that's been used.

In 21, it was more than that, but it was, yeah.

And this slide, it doesn't show the previous years, but it does show the dark blue is in 2020, we had estimated that Jumpstart in the year 25 would generate $232 million in it is currently projected to receive more than that.

And I'm not gonna do math in my head, but it's $184 million over the estimate that includes the $20 million.

So that I think this illustrates the point you are making there that in, so like when we were doing the modeling on housing, it was based on these dark blue numbers.

I will also just note, cause we were doing the estimates we tend to be conservative, especially in the early years of a new tax.

So I'll just put that there for you.

Thank you.

So, I mean, I guess the point I'm trying to make is we've been consistent about preserving it, using it for those four buckets in the percentages we have.

The overage has gone to general fund consistently for the last couple years.

And the other point I will make from your slide to underscore is that Jumpstart is a volatile fund source, which is something that council should consider.

We need to consider as we move forward in the uses of it in terms of filling general fund gaps with it.

Thank you.

Amen.

Council Member Kettle.

Thank you, Chair Strauss.

Really appreciate the robust briefing this time on Jumpstart.

Again, I want to lead with compassion and wisdom.

We have to do that.

I just wanted to make two points.

One is we do have to take into account new circumstances.

I think we have to better handle on inflation, the CPI.

We've just been going through the labor pieces of this, huge impacts with the CPI.

And today, you know, now it's, you know, down 1.1 to 3.4, but we're still not where we are, need to be related to inflation.

So that's a a huge circumstance that we need to take account of.

And plus, things like levies and the like, you know, they've changed the fiscal landscape.

One other point that I wanted to make, too, is on the policy side.

And this is a bit of a good governance point.

Like, under Jump Start, I believe, yes, we need to have better mental health in our schools.

And if we're going to do that as a city, and from a good governance point of view, we need to be advocating hard, hard, hard with the state because both areas are state functions.

And so if we're letting the state off the hook, if you will, that's a problem.

So from a good governance point of view, OIR, when they come out with their list next year in terms of what we're doing with our legislative reps and so forth in Olympia, mental health spending in schools better be towards the top of that.

Because if we're doing this without doing the due diligence, the good governance on the other side policy-wise, then that's a problem.

We cannot allow the county and the state to get off the hook because this shows up in many areas, including public safety.

And I won't go into details on that, but because of that experience, here in Jumpstart, we cannot allow that example to continue.

We have to be advocating.

I'm not saying anything related to what we're doing with Jumpstart itself, but we can't do it without the accompanying good governance piece related to the state.

Thank you.

Very well said.

Council President and Council Member Moore noting we have six minutes until 1140.

So I often hear the point made, thank goodness for Jumpstart because we've depended on it for X, Y, and Z, but somehow we managed to run government before Jumpstart just fine.

And so I want to...

make sure that we recognize that there were choices that were made for ongoing funding from this tax source.

And when we talk about 2021, that money being...

So the decision, this was passed in 2020 during the pandemic.

We also received, what, $250 million in federal COVID relief.

We decided to spend our federal COVID relief dollars and Jump Start on COVID relief and then other programs, I'm assuming.

And then also before the checks even began rolling in to the city in January 2022, in the fall of 2021, we decided, well, we needed another funding source.

So let's have a work group to talk about additional sources of progressive revenue.

And so what I'm getting at is that as we go through these questions, these policy questions, I think it is important to examine the reasons why we've become so dependent on this volatile revenue source, and it is volatile because even though it keeps growing, we've heard Ben Noble, Director of Central Staff, now talk about that's at our peril.

So I personally believe that I would put a plug into start making decisions about answering these questions and devising policy well in advance of our fall budget discussion.

Because I have no idea how the mayor is going to be...

Where is he going to find $250 million worth of cuts in the fall budget?

And it makes me nervous to think that we're going to have to be making those extremely difficult decisions on perhaps service cuts, etc., in a very short amount of time.

And so just for my colleagues, I think that I appreciate this presentation.

We do need to start thinking about what we're going to do with Jumpstart going forward from a policy perspective, instead of always having to make these decisions one off every year.

Yes.

And I'll just that was that was a lot.

And I don't think there was really a question.

I will just note that when I say but for the Jumpstart Fund, other like we would be in a different place.

The budget review analysis that we did on the citywide review really revealed for us that most of the growth in city ongoing city spending is inflationary.

So that is to say, to do the same things we were doing pre-pandemic, to do today.

And so, but for the Jumpstart Fund, there would have had to have been about $200 million of reductions in base services in 24, based on use, and the city was able to continue those services this year by using Jumpstart Funds and the one-time fund balance, some of which is from previous year Jumpstart allocations or the one-time COVID relief effort.

So that is it is essentially, you would have had, not you specifically, apologies, council president, the council, the city would have made, had to have significantly reduced base city services, and that, again, is what you face for future years.

And we've seen two, I've witnessed two downturns, you know, working at the city.

One was, you know, was in the wake of the Enron thing, so I started in 2002, so that was a big, that was a big problem with revenues, at least, and then there was the Great Recession, and so...

And that's what I'm talking about is we've managed to overcome some serious unexpected crises in revenue.

And so I think that we should put on that kind of thinking cap going forward as well.

Thank you.

Seeing as we have two minutes before I start wrapping down and Council Member Morales is excused because she has an in-district event in 12 minutes from now.

I will say now that I am, because Council Member Morales is excused, I'm the only one who was here during the pandemic.

And I can tell you that decision-making via Zoom was difficult and that's an understatement.

And it is better that we didn't use those federal funds to keep our staff employed and our services flowing so that we can make these hard decisions in person.

Council Member Moore.

Great.

Thank you.

A quick question.

In looking at, like, the jumpstart, housing and services, so I'm looking at the overall picture of money going to affordable housing.

So we have the payroll expense tax, we have the levy, and we have the Mandatory Housing Affordability Act, right?

So we have three significant sources and buckets.

And it would be really helpful for me, I don't know, maybe my colleagues here, if we could break down these, the other categories and look at where are the other funding sources and how are we amplifying this?

Because really, to get a cohesive, holistic picture of where all the money is coming for these particular city services because we're, well, we're spending a lot of money on affordable housing at the end of the day and we don't have a whole lot to show for it.

Something is not working here.

So anyway, be helpful to have that breakdown of where the money is coming from for all of these important pieces that we're funding through Jumpstart and other pieces of the budget.

Thank you.

Noted.

Well said, and at 1140, if there are no further questions, this does conclude the Wednesday, May 15th, 2024 Select Budget Committee.

We do finance and budget committees.

Our next meeting is a budget committee and is scheduled for Wednesday, June 5th, 2024, 9.30 a.m.

Thank you for attending.

If there's no further business to come before the committee, we will adjourn.

Hearing no further business, we are adjourned at 1141 a.m.