Seattle’s City Hall will be pinching pennies and on the hunt for new sources of revenue as it tangles with a looming, more than $230 million budget deficit next year.
The Seattle City Council’s Finance, Native Communities, and Tribal Governments Committee will hear an update on the numbers, an overview of how we got here, and a look at some of the possible paths to take climb out of the hole in a presentation (PDF) Wednesday morning.
According to the City Budgeting Office update, while the 2025 deficit will top $230 million, it could balloon to more than $452 million in 2026.
The presentation simplifies the contributing factors for the projected shortfalls to four factors.
“General Fund revenues have not recovered to where they would have been if not for COVID-19,” the presentation reads. Analysts also say inflation is “at a generational high, raising costs to provide services & pressure on our labor needs,” while federal COVID relief dollars have dried up. Past spending decisions are also catching up with the city, “Prior decisions to use one-time fund balance to support budget additions that became ongoing,” the presentation includes as its fourth deficit factor.
A simplified view of how to fix the problem? The council committee will hear that, too.
There are four options, the analysis says.
One, cut expenses including “Staff & Service Reductions.” Some of that belt tightening has already begun.
Two, “reduce self-imposed restrictions” on general fund “adjacent” sources like the JumpStart tax which was intended to fund COVID recovery, affordable housing, and social programs.
Three, “Raise Revenues.” CHS reported here on possible alternative new sources and taxes the city could consider.
The fourth could be taking what the presentation describes as a “One-Time Balancing Approach” to pounding out the deficit line item by line item.
While there is some hope that saving achieved by some early efforts will help reduce some of the projected gaps, the presentation also includes a stark reminder for the council committee — this projected deficit is a bigger deal than most. “The scale of this deficit is significantly larger than in past years and represents about 15% of our General Fund,” the report reads.
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The budget mismanagement by the previous council has left us in quite a significant hole. Maybe if the city could find the political will to clean up the downtown drug apocalypse, revenue will rebound. The current dytopian state of downtown is repealing businesses and visits from locals and tourists.
Hey the mayor both proposed and signed both the previous two budgets. I know civics are not taught very well in this country any more, but that’s how the government works.
Harrell vetoed the budget in 2022.
For 2023 the budge passed after Sawant was allowed to add her own projects, one of which was based on revenue that has been going down not up.
Even if Harrell hadn’t vetoed the budget? Government happens when parties negotiate.
So from the graph it looks like the base revenues have recovered to at or above 2019 levels. What is the additional spending we’ve added in the last 4 years that is causing this big gap?
Also, the Jumpstart Tax seems to have generated a huge amount of $$ in 2021 and has diminished to nearly nothing in just 2 years? Did big companies move out of the city to escape the tax? Would love to have someone dig in on what’s going on there, because it looks like it should fill the budget hole if it returned to 2021 levels…
Even if the tech industry wasn’t going through a down turn, Microsoft, Meta, Salesforce, etc… have be dropping their Seattle offices in favor of placing new positions in their Eastside campuses. Overall office space rental is decreasing each year.
The Jumpstart Tax creates an accounting hassle for companies to do business in Seattle; it is an even larger hurdle for companies to open new offices here.
The only way to make it a sustainable tax revenue is to lower the salary requirements and remove exemptions, which there are not many of.
The demographics for the future of Seattle aren’t all that positive; the number of children in the city has been falling and we aren’t seeing any growth in job creation.
Covid dollars and the one time insertion of the funds generated from the Paul Allen Estate has helped the city/state to push the question of overspending out by a few years.
The long term capital gains tax has generated more then double what initially projected, but as reported, while half that came from 8 individuals, the rest came from people who were going through divorce, had unexpected medical expenses, or similar cases where individuals were forced to sell long term investments that couldn’t be covered by tax planning. There are no IPO, etc… assuming that the 8 people who paid half the revenue generated work to minimize their tax exposure, the overall amount of money raised by that tax will decrease.
If the divorce rate goes up, or similar sorts of life events that require the sale of long term investments, we could see more money from that tax.
The inescapable conclusion here is the Council has taken on way too many expenditures through 2026. Look at the budget growth from 2019 to 2026 (projected). From 1.4 to 2.3 billion, I believe, or over sixty percent growth in seven years. It is pretty hard to keep a budget balanced when expenditures grow at over an eight percent annual rate. Time to sort through the budget, cull much of what was added these past five years, and bring realistic approaches to city spending again.
that green line is insane – looks like expenses are increasing 10% YoY? How? That’s way way way above inflation.
Would be nice to see these numbers adjusted for inflation and growth in the economy. According to back-of-the-envelope calculations, spending went up about 4% between 2019 and 2024 adjusted for inflation. Probably less if adjusted for size of the economy. The lack of increase in base revenue is striking. I believe the reason Jump Start revenue is not shown for 2025 and 2026 is that spending from that revenue is technically restricted to a few things (e.g., developing low income housing). It was only because Jump Start revenue came in above what was originally projected in its early years that some of it could be used to fill holes in the city’s budget.
The sharp line up for 2025 and 2026 is the concerning one. 15-20% increase over two years? That’s absolutely absurd unless we’re going to see a big increase in services in some way.
Simple answer – increase property tax. Wait, they did that already…
Curious how this is affected by the encampment cleanups and other huge “cleanup” funding. I read that there is a push for their to be a $950M bond put on A ballot to “assist with homelessness” and “”affordable housing””
I would be interested in more details about where money is spent, not just for salaries, but across business units, divisions and such.
Let me guess… the solution is more taxes for home/landowners, taxes on businesses that employee people while we give away freebies to homeless.
Seattle is also a sanctuary city, I happily invite all migrants to Seattle so the city can spend, spend, spend and cry about it after. We welcome you with unlimited arms, tired of Denver? Come here, free services!!!
FYI, I have to pay prop taxes.