>>> WELCOME TO THE APRIL 8
MEETING OF THE CITY OF
SEATTLE'S ECONOMIC AND REVENUE
FORECAST COUNCIL, I'M GOING TO
TURN THIS OVER TO THE CHAIR OF
THE COUNCIL, COUNCIL MEMBER?
>> GOOD AFTERNOON EVERYONE,
TODAY IS FRIDAY APRIL 8, 2022,
THE MEETING OF THE FORECAST
COUNSEL, WELCOME TO ORDER.
I'M JOINED WITH OUR FORECAST
COUNCIL COLLEAGUES,
COUNCILMEMBER TAMMY MORALES'S
OFFICE, OUR VICE CHAIR AND
SENIOR DEPUTY MAYOR, AND WE
ALSO HAVE THE CITY FINANCE
DIRECTOR, DIRECTOR GLENN LEE.
GOOD AFTERNOON EVERYONE, TODAY
WE ARE GOING TO BE JOINED FROM
THE OFFICE OF ECONOMIC AND
REVENUE FORECAST COME YOU
ALREADY HEARD FROM DIRECTOR BEN
NOBLE AND WE WILL HAVE OTHER
REPRESENTATIVES WITH US FROM
THE BUDGET OFFICE, THE SEATTLE
CITY COUNCIL CENTRAL STAFF AND
FROM EACH OF THE INDIVIDUAL
OFFICES AS WELL.
THE MAIN PURPOSE OF TODAY'S
MEETING IS FOR THE REVENUE
FORECAST TO RECEIVE THE UPDATED
REVENUE PROJECTIONS FROM THE
FORECAST OFFICE, AND FOR US AS
A CITY AND COUNSEL TO REVIEW
THE RECOMMENDED FORECAST.
THESE ARE KEY ELEMENTS OF THE
CITY'S BUDGET PROCESS, AND
THOSE FORECASTS WILL DEFINE THE
FINANCIAL RESOURCES THAT WE
HAVE AVAILABLE TO ALLOCATE OUT
THE BUDGETING PROCESS THAT IS
BEGINNING ALREADY AND WILL BE
PUBLIC AND AVAILABLE FOR FOLKS
TO DELIBERATE ON LATER THIS
FALL.
LET'S BEGIN BY FORMALLY
ADOPTING THE AGENDA FOR TODAY'S
MEETING, A COPY HAS BEEN
CIRCULATED TO MEMBERS AND IS
AVAILABLE ONLINE FROM THE
FORECAST COUNCIL'S WEBSITE.
I WILL MOVE TO THE ADOPTED
AGENDA, IS THERE A SECOND?
>> SECOND.
>> THANK YOU VERY MUCH, SENIOR
DEPUTY MAYOR, ANY ADDITIONAL
QUESTIONS ON THE PROPOSED
AGENDA FOR TODAY?
DOES ANY MEMBER WISH TO REMOVE
ANY AGENDA ITEM?
HEARING NONE.
ALL THOSE IN FAVOR, PLEASE SAY
AYE.
>> AYE.
>> ANY OPPOSED?
HEARING NONE.
THE AGENDA IS ADOPTED, THANK
YOU VERY MUCH AND THANK YOU TO
DIRECTOR NOBLE AND YOUR TEAM
FOR COMPILING THE MATERIALS,
THIS CONCLUDES THE SECOND
AGENDA ITEM, THIS IS APPROVAL
OF THE MINUTES FROM THE MARCH
14 MEETING.
A COPY HAS BEEN CIRCULATED TO
MEMBERS AND IS POSTED ONLINE.
PLEASE CHECK OUT THE NEW
ECONOMIC REVENUE FORECAST
COUNCIL'S WEBSITE WHICH HAS ALL
OF OUR MATERIALS POSTED IN A
TIMELY MANNER.
THOSE MATERIALS HAVE BEEN
POSTED AND CIRCULATED TO
MEMBERS OF THE COUNCIL.
I MOVED TO, EXCUSE ME, I MOVE
APPROVAL OF THE MINUTES. IS
THERE A SECOND?
>> SECOND.
>> THANK YOU VERY MUCH.
WONDERFUL.
ARE THERE ANY COMMENTS,
QUESTIONS OR EDITS THAT FOLKS
WOULD LIKE TO MAKE?
HEARING NONE.
LET'S GO TO, IF THERE'S NO
OBJECTIONS, THE MINUTES WILL BE
APPROVED.
THE MINUTES ARE APPROVED, THANK
YOU VERY MUCH AGAIN COLLEAGUES
AND THANKS TO THE TEAM
INCLUDING DIRECTOR NOBLE FOR
ALL YOUR WORK TO COMPILE THESE
MINUTES FOR US.
AS WE NOTED ON MARCH 4, THIS
BODY IS INTERESTED IN TRYING TO
SEEK PUBLIC COMMENT AND WE ARE
CONTINUING TO WORK ON THAT, IN
LIEU OF PUBLIC, TODAY, AS A
REMINDER, EVERY TIME WE HAVE A
REVENUE FORECAST COUNCIL
MEETING, THERE WILL BE A
SUMMARY CONVERSATION THAT WILL
TAKE PLACE, OF COURSE WE
WELCOME ANY PUBLIC COMMENT AT
THOSE MEETINGS AS WELL.
JUST A REMINDER FOR WHEN THAT
WILL BE, IT IS APRIL 20 AT 9:30
A.M..
MOVING ONTO THE NEXT ITEM ON
THE AGENDA, BIG DRUMROLL
PLEASE, THE PRESENTATION OF THE
APRIL, 2022 ECONOMIC REVENUE
FORECAST.
THIS INCLUDES RECOMMENDATION
FROM THE OFFICE OF ECONOMIC AND
REVENUE FORECAST COUNCIL FOR
THE REVENUE FORECAST FOR 2022,
2023 AND 2024.
THIS IS A REALLY EXCITING
OPPORTUNITY, I'M GOING TO TAKE
A QUICK MOMENT TO PAUSE AND
REFLECT ON WHAT GOT US TO THIS
MOMENT.
THIS IS REALLY THE FIRST CHANCE
THAT WE ARE HAVING IN A PUBLIC
FORUM TO HEAR FOR THE FIRST
TIME THE REVENUE FORECAST AS
PRESENTED BY THE INDEPENDENT
BODY ECONOMIC REVENUE FORECAST
OFFICE.
THEY ARE PRESENTING TO THIS
COUNSEL WHICH IS THE REVENUE
FORECAST COUNSEL AND THIS IS
OUR OPPORTUNITY TO HEAR THE
PROJECTIONS, OUR OPPORTUNITY TO
HEAR THE RECOMMENDATION FOR
ADOPTING THE FORECAST THEY WILL
BE PRESENTING TODAY.
A CHANCE FOR US TO ASK
QUESTIONS AND A CHANCE FOR US
TO MOVE FORWARD WITH UTILIZING
THIS INFORMATION AS WE CONSIDER
ANY SUPPLEMENTAL BUDGET ITEMS
FOR THIS YEAR AND ALSO BEGINS
THE FOUNDATION FOR OUR
CONVERSATION FOR 2023 BUDGETING
AS WELL.
AS I MENTIONED, THESE FORECASTS
ARE ESSENTIAL FOR THE OVERALL
CITIES BUDGETING PROCESS, WE
MUST OPERATE WITH A BALANCED
BUDGET AND WE WILL BALANCE THE
BUDGET TO THE RESOURCES DEFINED
TODAY AND ALSO PRESENTED BY THE
DIRECTOR IN THE UPCOMING APRIL
20 MEETING WHICH WILL ROUND OUT
THE FULL REVENUE FORECAST
PROJECTIONS.
TODAY THE OFFICE OF REVENUE
FORECAST WILL PRESENT THE
REVISED FORECAST FOR THIS YEAR,
2021, EXCUSE ME, 2022.
AND WILL INCLUDE THE INITIAL
FORECAST FOR 23 AND 24.
THE REVISED ESTIMATES FOR 22
WILL HELP CONFIRM WHETHER THE
BUDGETS WE HAVE APPROVED FROM
LAST FALL REMAIN IN BALANCE FOR
THIS YEAR.
AND THE NEW FORECAST FOR 2023
AND 2024 WILL PROVIDE OUR FIRST
LOOK AT THE RESOURCES AVAILABLE
TO US AS WE BEGIN TO PLAN FOR
THE CITY'S 23 AND 24 BUDGET
WHICH THE CITY COUNCIL ADOPT IN
THE FALL.
CONSISTENT WITH THE WORKPLAN WE
APPROVED LAST MONTH, THIS'LL BE
THE FIRST FORECAST PRESENTATION
FOR THIS YEAR, THE FORECAST
OFFICE WILL RETURN IN AUGUST
AND THEN AGAIN IN NOVEMBER TO
FURTHER REFINE THESE FORECASTS.
AS ADDITIONAL ECONOMIC AND
REVENUE INFORMATION BECOMES
AVAILABLE AT THE LOCAL AND
NATIONAL LEVEL.
TODAY THE OFFICE OF REVENUE
FORECAST WILL PRESENT THREE
DIFFERENT ECONOMIC AND REVENUE
SCENARIOS, THE BASELINE,
PESSIMISTIC AND OPTIMISTC
FORECAST.
THE OFFICE WILL PROVIDE A
RECOMMENDATION ABOUT WHICH OF
THESE SCENARIOS SHOULD BECOME
THE FORMAL FORECAST.
WE WILL THEN HAVE THE
OPPORTUNITY TO DISCUSS THIS
RECOMMENDATION AS A COUNSEL
HERE TODAY AND TO DECIDE
WHETHER TO AFFIRM THE
RECOMMENDATION OR CONSIDER A
DIFFERENT PATH AND DIFFERENT
FORECAST SCENARIO.
WITH THAT, LET ME WELCOME AGAIN
DIRECTOR BEN NOBLE WHO HAS BEEN
WORKING WITH THE TEAM INCLUDING
JOHN AND THE TEAM AT THE
REVENUE FORECAST OFFICE TO
PROVIDE AN OVERVIEW OF OUR FIRST
PUBLICLY AVAILABLE REVENUE
FORECAST AVAILABLE AND
PRESENTING TO OUR COUNSEL HERE
TODAY.
THANK YOU VERY MUCH, DIRECTOR
NOBLE.
>> AND THANK YOU , YOU DID A
FINE JOB ON THE INTRODUCTIONS,
I'M JUST GOING TO DIE THEN, AS
YOU SAID SOME OF WHAT I WAS
GOING TO SAY, SO WE ARE GOOD TO
GO.
I'M GOING TO SHARE MY SCREEN,
MY POWERPOINT.
THERE WE GO.
IS THAT WORKING FOR EVERYBODY?
PERFECT.
SO WITHOUT FURTHER ADO, LET ME
JUST GIVE YOU A BRIEF OUTLINE
OF THE PRESENTATION TO FOLLOW,
ESSENTIALLY TWO PARTS, WE ARE
GOING TO START WITH THE
ECONOMIC UPDATE, SO WE WILL
TAKE A LOOK AT RECENT
DEVELOPMENTS NATIONALLY AND
REGIONALLY AND WE WILL SHIFT
FOCUS TO TALK ABOUT THE
PROJECTIONS.
AGAIN, BOTH THE NATIONAL AND
THE REGIONAL LEVEL.
AND AT THIS STAGE, WE WILL
ACTUALLY MAKE A RECOMMENDATION
REGARDING WHICH OF THE
SCENARIOS TO USE BECAUSE IT IS
A JUDGMENT ABOUT THE ECONOMY
THAT LEADS TO A DIFFERENT
REVENUE FORECAST, AND FROM OUR
PERSPECTIVE, IN TERMS OF DOING
OUR WORK, IT MAKES MORE SENSE
TO MAKE THAT JUDGMENT WITHOUT
IN SOME SENSE KNOWING WHAT THE
APPLICATIONS ARE FOR REVENUE,
SO WE ARE JUST THINKING ABOUT
THIS OBJECTIVELY.
AS YOU MAKE YOUR FINAL
APPROVALS, YOU WILL SEE THE
WHOLE PICTURE.
THAT IS WHY THAT RECOMMENDATION
IS PLACED THERE IN THE
FORECAST.
THEN WE WILL MOVE ON TO TALK
ABOUT THE ACTUAL REVENUES.
I WILL REMIND YOU WHICH OF THE
SPECIFIC REVENUE STREAMS, AT
THE FORECAST OFFICE WE ARE
RESPONSIBLE FOR THE MAJOR
REVENUE STREAMS IN THE GENERAL
FUND BUT THERE ARE SOME SMALLER
ONES AND SOME OF THE NON-
GENERAL REVENUE STREAMS THAT
REMAIN THE RESPONSIBILITY OF
THE BUDGET OFFICE.
BUT IN PARTICULAR, WE WILL
PROVIDE YOU A SUMMARY AND ANY
COMPARISONS FOR THE BIG REVENUE
STREAM SALES, THE PAYROLL TAX
AND WE WILL PRESENT INFORMATION
ON THE PRIVATE UTILITY TAX AND
EMISSIONS TAX, AND AND ALSO
SOME OF THE KEY INPUTS THAT
WILL GO INTO THE PROPERTY TAX
CALCULATION AND I WAS A LITTLE
BIT MORE ABOUT PROPERTY TAXES.
AND AT THE END, WE WILL HAVE A
TABLE THAT PROVIDES A FULL
SUMMARY, WITH A COMPARISON TO
2021 AS WELL AS TO THE NOVEMBER
FORECAST FOR 2022 SO YOU CAN
SEE WHAT HAS CHANGED AND ALSO
WHAT WE ARE SHOWING FOR 23 AND
24 AND ESSENTIALLY HOW THOSE
RELATE TO THE 2021 AND 2022.
SO, DIVING IN, STARTING WITH
THE ECONOMIC UPDATE.
I THINK ONE OF THE THINGS TO
RECOGNIZE OVERALL IS THAT WORLD
EVENTS THAT ARE IN SOME SENSE
BEYOND ECONOMICS ARE REALLY
DRIVING A GREAT DEAL OF
UNCERTAINTY IN THE ECONOMY.
BOTH NATIONALLY, WELL, WORLDWIDE
, AND LOCALLY AS WELL.
IN A LOT OF WAYS, LOCALLY IT
WOULD APPEAR THAT THE COVID
IMPACTED THE NATIONAL SCALE, AND
IS ENDING AT LEAST IN PART OF
ITS BROADER ECONOMIC IMPACTS,
BUT IT'S ALSO WORTH RECOGNIZING
THAT THAT IS NOT TRUE ELSEWHERE
ACROSS THE GLOBE.
I WAS JUST ON A CALL WITH
SOMEBODY IN SHANGHAI, IT WAS
WORK RELATED, THEY WERE GOING
INTO FOUR OR FIVE DAYS A
LOCKDOWN, JUST AS AN EXAMPLE.
THE OTHER REALLY SIGNIFICANT
DEVELOPMENT THAT HAS ESCALATED
SIGNIFICANTLY SINCE WE LEFT A
MONTH AGO, IS RUSSIA'S WAR
AGAINST UKRAINE.
WE ARE GOING TO TALK ABOUT IT
TODAY IN TERMS OF ITS ECONOMIC
IMPACTS.
I WANT TO RECOGNIZE THAT IT IS
A HUMAN TRAGEDY, IT HAS
ECONOMIC IMPLICATIONS, IT'S
ALSO WORTH RECOGNIZING IF NOT
THE ONLY WAR ONGOING AS WE SPEAK
. WE ARE GOING TO TALK ABOUT IT
TODAY BECAUSE IT'S THE ONE THAT
HAS THE BIGGEST ECONOMIC
IMPACTS, SO I WANT TO MAKE
THOSE POINTS BEFORE WE JUST
TALK ABOUT IT IN TERMS OF
ECONOMIC IMPLICATIONS.
BUT IT HAS HAD THOSE FOR SURE,
SO SUPPLY CHAIN DISRUPTIONS,
THE CONSTRAINT IN
MANUFACTURING, FOR EXAMPLE THE
AUTOMOBILE INDUSTRY.
FOOD PRODUCTION, BOTH UKRAINE
AND RUSSIA ARE PRODUCERS OF
FOOD COMMODITIES AND FEED
SUPPLIES.
SO THE DISRUPTIONS HAVE LED TO
AN ESCALATION IN COMMODITY
PRICES AND ENERGY PRICES.
ANYBODY WHO IS DRIVING A CAR
HAS EXPERIENCED THE ESCALATED
PRICES FOR GAS, THAT IS TRUE
ACROSS THE ECONOMY.
SO ONE OF THE THINGS THAT HAS
COME ABOUT AS A RESULT OF THIS,
AND WAS TRUE WITH COVID AS
WELL, IS THAT INFLATION IS
ACCELERATING.
INITIALLY LAST FALL THE
CONSENSUS WAS THAT THERE WAS
GOING TO BE A SPIKE IN THE
INFLATION IN PART, PUSHED BY
THE STIMULUS FROM THE FEDERAL
GOVERNMENT, WHICH HAS BROUGHT A
LOT OF INCOME INTO THE ECONOMY
BUT ALSO THE SUPPLY CHAIN,
THERE WAS LESS STUFF AVAILABLE
SO THAT COMBINATION WAS DRIVING
UP THE PRICES.
BUT, THAT SAID AND THE RISK OF
INFLATION WILL BE THE THEME
TODAY, BUT THAT ALL SAID, THOSE
RISKS ACKNOWLEDGED, BUT WE HAVE
SEEN OVER THE PAST YEAR OR MORE,
IS THAT BOTH THE NATIONAL AND
REGIONAL ECONOMY HAVE BEEN
QUITE RESILIENT.
IN PARTICULAR, IF WE FOCUS ON
EMPLOYMENT AND JOBS, THAT COULD
LEAD US TO THE GRAPH WE SHOWED
YOU BEFORE BUT IT IS WORTH
EMPHASIZING, THE NATIONAL
RECOVERY HAS BEEN PARTICULARLY
STRONG.
WE TRAILED SOMEWHAT LOCALLY IN
TERMS OF EMPLOYMENT OVER THE
PAST YEAR, BUT HAVE BEEN
CATCHING UP IN THE SECOND HALF
OF 2021, AND NOW INTO 22.
SO OVERALL, IN TERMS OF OVERALL
EMPLOYMENT, THE U.S. IS STILL
DOWN ABOUT 1.5% IN TERMS OF THE
NUMBER OF JOBS.
OUR LOCAL AREA IS DOWN ABOUT
1.8%, ALL OF THIS IS RELATIVE
TO PRE-PANDEMIC.
BUT ON THE OTHER HAND, IN THIS
RESILIENCY, THE ECONOMY IS
CONTINUING TO GENERATE JOB
OPPORTUNITIES, SO THERE IS A
GOOD DEAL NUMBER OF OPENINGS.
ONE OF THE IMPACTS OF THE
PANDEMIC IS THAT THE WORKFORCE
IS STRONG, AS PEOPLE HAVE
STEPPED AWAY FROM LOOKING FOR
WORK AND THEREFORE COUNTED AS
UNEMPLOYED, SO THOSE ARE
INTERESTING AND POTENTIALLY
LONGER-TERM EMPLOYMENT
DYNAMICS.
BUT AT THE MOMENT, THERE ARE
JOBS AVAILABLE AND BALANCING
BETWEEN THE JOBS AVAILABLE AND
THE FOLKS LOOKING HAS LED TO AN
INCREASE IN WAGES AS WELL,
HOURLY WAGES WERE UP MORE THAN
12% ON AVERAGE. WE WILL FOCUS ON
LEISURE AND HOSPITALITY, AS WE
RECRUIT FOLKS BACK TO THOSE
JOBS.
AND JUST ANOTHER CAVEAT, THOSE
ARE NOTABLE WAGE GAINS, BY THE
INFLATION WE ARE SEEING
ACCELERATE AND EXTEND. SO I
WANTED TO TALK A LITTLE BIT
MORE ABOUT JOBS IN THE LOCAL
AREA, TO GIVE YOU A BETTER
SENSE OF WHAT THE IMPACTS HAVE
BEEN, BECAUSE THEY VARY
SIGNIFICANTLY ACROSS THE CITIES
AND THE REGIONS EMPLOYMENT
SECTORS.
SO THE GRAPHIC ON THE RIGHT
HIGHLIGHTS JOB CHANGES, A
NUMBER OF JOBS CHANGED SINCE
THE PRE-PANDEMIC TIME.
AND WHAT YOU CAN SEE IS THAT
THE RED IS THE TOTAL, FOR THE
FIRST BULLET, THE REGION IS
STILL DOWN ABOUT 30,000 JOBS.
BUT, WHAT'S INTERESTING IS THAT
IT'S CERTAINLY NOT ACROSS THE
BOARD, THAT SOME SECTORS HAVE
SIGNIFICANT LEVELS FROM JOB LOSS
WHILE OTHERS HAVE SIGNIFICANT
GAINS.
AND AGAIN, THIS GRAPHIC
ILLUSTRATES THIS QUITE WELL.
LEISURE AND HOSPITALITY AND
MANUFACTURING SECTORS ARE STILL
DOWN IN TERMS OF JOBS RELATIVE
TO THE PRE-PANDEMIC.
FOR INSTANCE, HOSPITALITY, IT
ONLY BROUGHT BACK ABOUT 66% OF
THE JOBS THAT WERE LOST AS THE
PANDEMIC HIT.
MANUFACTURING AS WELL.
CERTAINLY NOT ALL OF IT.
BUT WHAT YOU SEE IS THAT AT THE
BOTTOM HERE, UNDER THE GRAPHIC,
IS THAT PROFESSIONAL SERVICES
AND THE INFORMATION TECHNOLOGY
SECTOR HAVE ADDED A SIGNIFICANT
NUMBER OF JOBS OVER THE
PANDEMIC.
BUT IN SOME WAYS THERE HAS BEEN
A TRANSFORMATION IN THE
EMPLOYMENT PATTERNS OF THE
AREA.
LESS FOCUSED ON LEADER IN
HOSPITALITY IN MY FRACTURING
AND MORE ON PROFESSIONAL
SERVICES AND INFORMATION.
WITHOUT THAT SIGNIFICANT GROWTH
IN THOSE SECTORS, THE
EMPLOYMENT PICTURE WOULD BE
NOTABLY WORSE.
SO, AS MUCH AS THIS IS A LITTLE
DISTRESSING IN TERMS OF LEISURE
AND HOSPITALITY AND
MANUFACTURING, IN TERMS OF THE
OVERALL REVENUE FORECAST, THERE
IS A SPOT WHERE WE SEE
POTENTIAL FOR UPSIDE.
SO, FOCUSING FOR A MINUTE HERE
ON THE LOCAL REGION AND
RESTAURANTS AND LEISURE AND
HOSPITALITY SECTOR, THIS GRAPHIC
THAT I HAVE SHOWN YOU IN THE
PAST, THIS EXPLAINS THE
DIFFERENCES WE HAVE SEEN IN THE
SECTOR, BUT ALSO THE PROSPECTS
TO RECOVERY.
SO IN THIS GRAPHIC COME OF THE
BLUE LINE IS THE U.S., THE
REDLINE IS SEATTLE AND THIS IS
AN INDEX THAT IS TRACKING A
NUMBER OF DINERS AND
RESTAURANTS THAT THE DATA COMES
FROM OPEN TABLE. SO WE STARTED
OFF 100%, THAT IS WHERE WE WERE
BEFORE THE PANDEMIC, AND THEN
IN SOME SENSE, THE WAVES OF THE
PANDEMIC ARE VISIBLE IN THE
CHART. THE THING PROBABLY MOST
TO NOTE, WE WERE HAVING A TIME
OF RECOVERY IN THE SECOND HALF
OF LAST YEAR, EXCUSE ME, IN THE
FIRST HALF OF LAST YEAR AND THE
SECOND HALF, THAT PLATEAUED AS
THE DELTA VARIANT HIT.
THERE WAS A SPIKE DOWNWARD AS
OMICRON HIT, BUT THINGS HAVE
BEEN IN RECOVERY SINCE THEN.
AND THAT HAS BEEN TRUE, I WAS
TRACING THE LOCAL LINE, THERE'S
TWO AT THE NATIONAL LEVEL AS
WELL.
THAT IS THE DISPARITY BETWEEN
THE NATIONAL LEVEL IN THE
LOCAL, THAT'S ONE OF THE
REASONS THERE SOME UPSIDE HERE.
WE HAVE BEEN MORE CONSERVATIVE
IN OUR RESPONSE TO COVID,
THROUGH EMPHASIZING SOCIAL
DISTANCING AND OTHER
REGULATIONS.
THAT LED US TO HAVE A MORE
DRAMATIC REDUCTION IN THESE
DEMANDS FOR THESE SORTS OF
SERVICES.
BUT EVERY REASON TO THINK THAT
WILL TURN AS OMICRON FADES.
SO, EXPECTATIONS AND ACTIVITY
IN THE SECTOR WILL INCREASE IN
THE NEXT FEW MONTHS, THROUGH
THE REMAINDER OF THIS YEAR AND
THAT WILL HELP DRIVE REVENUE.
THIS SECTOR ISN'T A HUGE
CONTRIBUTOR TO THE CITY'S
REVENUE BUT NOT INSIGNIFICANT
EITHER.
SO AGAIN, THAT IS THE POTENTIAL
UPSIDE.
SHIFTING TO HOTELS, VERY
SIMILAR STORY IN TERMS OF
PATTERNS, AGAIN THE BLUE LINE
IS THE U.S., THE REDLINE IS THE
SEATTLE AREA.
AN OBVIOUS DROP ASSOCIATED AS
COVID HITS.
AND THE SLOW RECOVERY SINCE
THEN, THIS GRAPHICINCLUDES
PROJECTIONS AS WELL.
ONE OF THE THINGS, RECOGNIZING
THAT WE NEEDED TO UNDERSTAND
BETTER WHERE THE SECTOR MIGHT
BE HEADED, ONE OF THE THINGS WE
DID WAS TO PURCHASE ACCESS TO
SOME DATA THAT IS TRACKING
HOTEL ROOMS, OCCUPANCY, AND
PROJECTIONS OF WHERE THEY
ANTICIPATE DEMANDS TO BE HEADED
, AND THAT IS ILLUSTRATED HERE.
WE HAVE INCORPORATED THE
INFORMATION ON THE FORECAST.
THE BOTTOM LINE ON THE HOTELS
IS THE EXPECTATION IS THE
RECOVERY WOULD BE SOMEWHAT
SLOWER.
RESTAURANTS ARE OBVIOUSLY,
LOCAL DEMAND IS A BIG DRIVER.
HOTELS REQUIRES RECOVERY IN
TOURISM AND/OR THE BUSINESS
TRAVEL SECTOR.
EXPECTATIONS THAT WILL TAKE
LONGER MAYBE TILL MID 24, FOR
US TO ACHIEVE THE SAME LEVELS
THAT WE SAW PRE-PANDEMIC.
BUT AGAIN, REASON TO SEE UPSIDE
HERE AS THE PANDEMIC WANES AND
THE EXPECTATION THAT TRAVEL AND
LEISURE PICKUP.
SO TO GIVE YOU AN UPDATE AND
WHAT WE HAVE SEEN RECENTLY AND
WHAT WE ARE EXPECTING IN THAT
PARTICULAR SECTOR, GOING TO
SHIFT NOW AND I'M GOING TO TURN
THIS OVER, TO TAKE A STEP BACK,
LOOKING AT THAT PARTICULAR
SECTOR, IT'S IMPORTANT TO TAKE
A FORWARD LOOK AT THE ECONOMY
AS A WHOLE AT THE NATIONAL
LEVEL AND AT THE REGIONAL LEVEL
AS WELL.
THAT IS WHERE JAN HAS BEEN
FOCUSED, SO I'M GOING TO TURN
IT TO HIM TO CONTINUE.
>> THANK YOU VERY MUCH.
SO GOING TO THE OUTLOOK FIRST
FOR THE NATIONAL ECONOMY, AND
THEN FOR THE REGION.
FOR THE NATIONAL ECONOMY,
BEFORE RUSSIA'S INVASION OF
UKRAINE, THE BIGGEST CONCERNS
WERE THE DISRUPTIONS IN THE
SUPPLY CHAIN, AND THE RESULTING
HIGHER INFLATION. THOSE ISSUES
HAVE BEEN FURTHER EXACERBATED BY
THE WAR IN UKRAINE AND THIS
CHART CLEARLY ILLUSTRATES THE
RISKS ON THE DOWNSIDES HAVE
BECOME MUCH LARGER THAN THEY
WERE IN THE FALL.
SO WHEREAS THE BASELINE, AS YOU
CAN SEE, MORE OR LESS THE SAME
WHEN WE WERE WORKING ON THE
NOVEMBER FORECAST.
THE DOWNSIDE SCENARIO NOW FOR
THE NATIONAL ECONOMY, THAT
DOESN'T SHOW A RECESSION YET,
JUST DOES NOT SEE A RECESSION
AS A PESSIMISTIC OUTCOME, IT'S
MORE OF A SLOWDOWN OF THE
ECONOMY, SO THE REAL GDP ON THE
LEFT PART, THROUGHOUT 2022. FOR
EMPLOYMENT, THE IMPLICATIONS
ARE LITTLE BIT WORSE, AND YOU
CAN SEE THE NATIONAL EMPLOYMENT
THROUGHOUT 2022 AND INTO 2023.
SO IN A PESSIMISTIC SCENARIO,
THERE WILL BE A SLOWDOWN, NOT
NECESSARILY A RECESSION YET.
THAT IS JUST AN INITIAL
ASSESSMENT OF THE IMPLICATIONS
OF THE WAR IN RUSSIA, AND WE
WILL DISCUSS THAT LITTLE BIT
FURTHER LATER ON. IN ADDITION
TO CHANGING HOW SEVERE THE
PESSIMISTIC SCENARIO MIGHT BE,
I'M JUST ALSO RECOGNIZING THE
INCREASE, THE LIKELIHOOD OF A
PESSIMISTIC SCENARIO FROM 30%
IN OCTOBER, NOW AT 35% AS OF
MARCH, NATIONAL FORECAST.
LET ME GO TO THE NEXT SLIDE,
PLEASE.
ONE SECOND, SORRY.
NOW, THE BIGGEST, THE IMMEDIATE
IMPLICATION OF THE WAR IN
RUSSIA IS THE IMPACT ON THE
COMMODITY PRICES AND THE IMPACT
ON INFLATION OVERALL. THAT HAS
IMPLICATION FOR THE DIRECTION
THAT THE POLICY WILL TRY TO TAKE
, BEFORE THE WAR THAT RECEIVED
INFLATION TO BE VERY, EXPECTED
TO JUMP QUITE FAST.
AS YOU CAN SEE IN THE CHART ON
THE LEFT, THE INFLATION HAS
BEEN REVISED UP, AND THE
INFLATION IS NOW PERCEIVED TO
BE MORE PERSISTENT, PESSIMISTIC
SCENARIO EVEN MORE SO, INSTEAD
OF A DECLINE IN 2022, THE
HIGHER INFLATION IS EXPECTED TO
PERSIST INTO 2023.
THERE IS VERY LITTLE THAT THE
FED CAN DO RIGHT AWAY. THE
IMPACT OF INTEREST RATE
INCREASES ARE GOING TO TAKE A
LONGER TIME TO TAKE IMPACT, BUT
THAT IS NOW EXPECTED TO TAKE A
MORE AGGRESSIVE STANCE, AND
MORE AGGRESSIVE MONETARY
TECHNIQUE IS EXPECTED, THAT
WILL HAVE NEGATIVE IMPLICATIONS
FOR THE ECONOMY AS A WHOLE.
AGAIN, FURTHER INCREASING THE
DOWNSIDE TREND IN THE ECONOMY,
AND HOW LIKELY THE FED IS GOING
TO BE ABLE TO MANAGE THE SO-
CALLED SOFT LANDING WITHOUT
TRIGGERING A RECESSION BECAUSE
OF THE NECESSARY INCREASED IN
THE INTEREST RATE WHICH IS
NEEDED TO BRING DOWN THE
INFLATION.
AND THAT INFLATION IS REALLY
REALLY BROAD-BASED AND VERY
CLEARLY VISIBLE IN GAS
STATIONS, VERY CLEARLY VISIBLE
FOR PEOPLE WHO ARE TRYING TO
BUY HOMES BECAUSE THE PRICE OF
HOUSING HAS INCREASED, THE
PRICE OF HOMES ARE GOING UP,
ALREADY BEFORE THE WAR, AND NOW
THERE IS EVEN SOME CONCERN THAT
THERE MIGHT BE SOME KIND OF
INITIAL SIGNS OF A HOUSING
BUBBLE, POTENTIALLY FORMING
WHICH FURTHER ADDS TO THE
UNCERTAIN AND POTENTIAL DOWNSIDE
TRENDS.
NEXT SLIDE, PLEASE.
>> I JUST WANT TO INTERJECT AND
LET THE COUNCILMEMBERS KNOW, IF
YOU HAVE ANY QUESTIONS AT ALL
OR NEED CLARIFICATION, PLEASE
FEEL FREE TO ASK THOSE DURING
THE PRESENTATION.
WE CAN PAUSE IF THERE ARE ANY.
OKAY, GREAT, THANK YOU.
>> SURE.
OKAY, MOVING ON TO THE REGIONAL
OUTLOOK.
IN TERMS OF THE OVERALL TRENDS,
AND THE REGIONAL ECONOMY IS
EXPECTED TO BE FOLLOWING A
SIMILAR SORT OF BASE IN
EMPLOYMENT RECOVERY. AGAIN, THE
LEFT PART OF THE CHART SHOWS
POSSIBLE OUTCOMES, FOR
EMPLOYMENT AND THE DARK LINE
ILLUSTRATES THE DOWNWARD TREND,
OF THE PESSIMISTIC SCENARIO
WHERE THE EMPLOYMENT WILL
RETREAT INSTEAD OF RECOVERING
THE SECOND HALF OF THE YEAR,
IT'LL TAKE ADDITIONAL COUPLE
YEARS TO REACH PRE-PANDEMIC
LEVEL.
IN THE BASELINE SCENARIO
HOWEVER, THE SOLID RECOVERY AND
THE LABOR MARKET IS SHOWING THE
RESULTS IN EMPLOYMENT, REACHING
PRE-PANDEMIC LEVEL IN THE
SECOND HALF OF 2022 AND
CONTINUING MAYBE AT A SLOWER
RATE THAN WE HAVE SEEN LAST
YEAR, BUT CERTAINLY AT A
HEALTHIER RATE.
THE SECOND HALF OF THE CHART
SHOWS PER CAPITA PERSONAL
INCOME, THERE HAS BEEN A
SIGNIFICANT REVISION IN THE
HISTORICAL DATA FOR PERSONAL
INCOME THAT WE USE AS ONE OF
THE INPUTS IN THE FORECASTING
MODEL.
SO, WE WERE FORCED, WE HAD TO
REVISE AND UPDATE OUR
FORECASTING MODEL TO
INCORPORATE THIS NEW
INFORMATION OR REVISED AND
CORRECTED INFORMATION ON THE
HISTORICAL LEVELS OF INCOME.
AND WHICH FURTHER COMPLICATES
OUR REVENUE FORECAST.
NEXT SLIDE, PLEASE.
>> I HAVE ONE QUESTION.
THE IMPACTS OF, SO THE
DIFFERENCE BETWEEN THE
BASELINE, THE OPTIMISTIC AND
THE PESSIMISTIC ON THE
EMPLOYMENT INDEX, ARE THOSE
IMPACTS OF INTERNATIONAL, WHAT
WE SEE COULD POTENTIALLY HAPPEN
INTERNATIONALLY, OR IS THERE
SOMETHING ELSE THAT IS GOING ON
? IT'S THE LARGEST GAP, SO I'M
JUST WONDERING, WHAT IS
PROBABLY THE FACTOR THAT YOU
WOULD ATTRIBUTE THAT LARGE GAP
TWO, LIKE WHAT TAKES IT FROM
BASELINE TO PESSIMISTIC VERSUS
BASELINE, IS THAT A POTENTIAL
FOR A WORLD WAR, WHAT IS THAT
GAP ATTRIBUTED TO?>> SO, THE
UNCERTAINTIES MAINLY COMING
FROM THE WAR IN UKRAINE, ITS
IMPACT ON THE PRICES AND AN
EXTENSION, HOW MUCH THAT WOULD
HAVE TO INCREASE THE INTEREST
RATES AND IN GENERAL, HIGHER
INTEREST RATES ARE ASSOCIATED
WITH LOWER ECONOMY ACTIVITY AND
LOWER EMPLOYMENT FROM DIFFERENT
SEGMENTS OF THE ECONOMY, BEING
AFFECTED TO A DIFFERENT DEGREE.
SO EMPLOYMENT SLOWDOWN WOULD BE
CONCENTRATED IN SOME PARTS OF
THE ECONOMY. PROFESSIONAL AND
BUSINESS SERVICES, IN THE
CONSTRUCTED SECTOR, THOSE ARE
THE AGENCIES WHERE THE
EMPLOYMENT WOULD BE AFFECTED
THE MOST BY THE INCREASING
INTEREST RATE, HIGHER COMMODITY
PRICES, LOWER INVESTMENT BY
BUSINESSES BECAUSE OF OVERALL
PESSIMISTIC OUTLOOK IN THE CASE
OF A PROLONGED CONFLICT, AND A
CASE OF SANCTIONS ON RUSSIA
WHICH ARE EVEN IF THE CONFLICT
WOULD BE RESOLVED QUICKLY,
THOSE SANCTIONS ARE EXPECTED TO
BE THERE.
AND THEIR EFFECT ON INCOMES ON
EMPLOYMENT ARE TO A LARGE
DEGREE UNCERTAIN.
AGAIN, THIS IS THE INITIAL
ASSESSMENT, WE WILL PROVIDE
SOME ADDITIONAL UPDATES.
>> THE PESSIMISTIC FORECAST IS
NOTABLY MORE PESSIMISTIC THAN
IT WAS A MONTH AGO, TWO MONTHS
AGO, AND TO BE HONEST, AS YOU
HAD SUGGESTED, IT'S A
COMBINATION OF THE INFLATION
RISK AND THE WAR RISK AMONG THE
INFLATION RISK BECOMES A
CONCERN BEFORE THE WAR AND IT IS
THE FED'S RESPONSE TO RAISING
INTEREST RATES.
SO THAT WAS ALREADY AN
INCREASING CONCERN, THE WAR AS
AN ELEMENT ON TOP OF THAT.
SO IT'S NOT HARD TO IMAGINE A
PESSIMISTIC SCENARIO THAT IS
NOTABLY WORSE THAN WHAT HAD
BEEN ANTICIPATED BEFORE.
THE BIG DIFFERENCE IS THE
INFLATION IS STRONGER AND
LASTING LONGER AND THE OTHER
BIG DIFFERENCE IS THE WAR AND
THEY ARE ALSO COMPOUNDING THE
INFLATION AS WELL.
THAT IS THE KEY ISSUE THERE.
>> I APPRECIATE THAT, THANK
YOU.
>> THAT WAS A GREAT QUESTION, I
DO HAVE ONE MORE QUESTION ON
THE PREVIOUS SLIDE.
WHEN WE LOOK AT SLIDE 11 HERE,
AND WE ARE PROJECTING
EMPLOYMENT RATES, HOPEFULLY
CONTINUING TO RETURN TO PRE-
PANDEMIC AND SURPASS PRE-
PANDEMIC LEVELS, I'M WONDERING
IF THERE IS ANY INDICATORS THAT
WE CAN LOOK OUT FOR CHANGES IN
SPECIFIC SECTORS, TO KNOW
WHETHER OR NOT AS A SECTOR
REBOUNDS, WHETHER OR NOT THEY
ARE BRINGING BACK EMPLOYEES AT
THE SAME RATE.
ON SLIDE EIGHT, YOU SHOW THE
RECOVERY TRAJECTORY FOR THE
HOSPITALITY INDUSTRY, HOWEVER
WE KNOW THAT EVEN THOUGH THAT
IS LOWER THAN WE WOULD LIKE IT
TO BE, EVEN WITHIN THE RECOVERY
THAT WE ARE SEEING THERE.
MANY OF THE REPORTS WE HAVE
BEEN GETTING FROM FOLKS WHO
WORK WITHIN THE HOSPITALITY
SECTOR, SPECIFICALLY IN THE
HOTELS, SO THEY ARE NOT
BRINGING BACK THE SAME NUMBER
OF EMPLOYEES AS PREVIOUS, OR
HAVING HIGHER WORKLOADS, IN
THAT MANY OF THE ROOMS ARE
GETTING USED FREQUENTLY.
IS THERE ANY WAY TO SEE WITHIN
CERTAIN SECTORS THAT ARE
COVERING WHETHER OR NOT THEY
ARE BRINGING BACK THAT SAME
LEVEL OF EMPLOYEES IN THE
FUTURE AND DOES THAT HAVE, DO
WE HAVE ANY ABILITY TO FIGURE
THAT OUT WHETHER WE ARE LOOKING
AT THE PESSIMISTIC OR BASELINE
FORECAST HERE.
>> YES, WE CERTAINLY DO,
THERE'S A COUPLE OF SLIDES
WHERE WE ARE SHOWING THE
CURRENT SITUATION IN THOSE
INDUSTRIES.
AND RIGHT NOW COMPARED TO PRE-
PANDEMIC PEAK.
THE FORECAST WE ARE PRODUCING,
OUR EMPLOYMENT IS BROKEN DOWN
BY INDUSTRY, SO WE DO HAVE A
DETAILED INDUSTRY BY INDUSTRY
FORECAST, HOW WE EXPECT
DIFFERENT PARTS OF THE ECONOMY
TO BE RECOVERING, FOR EXAMPLE
THE PROFESSIONAL BUSINESSES TO
GROW COMPARED TO LEISURE AND
HOSPITALITY, BASED ON ALL THE
INPUTS. AND IF THEY ARE
EXPECTED TO COME BACK TO THEIR
OCCUPANCY THAT THEY SAW PRE-
PANDEMIC, OR HOW FAST THE
REVENUE IS AVAILABLE.
SO THOSE ARE THE DIFFERENT
INPUTS.
>> OKAY, THANKS, I THINK THAT
THE OTHER LAYER IS REALLY
QUESTIONING WHETHER OR NOT
HOTEL OCCUPANCY OR NUMBER OF,
OR THE REVENUE GENERATED BY
HOTEL IS GETTING THE FULL
PICTURE OF THE EMPLOYMENT.
AS OCCUPANCY AND REVENUE FOR A
SECTOR PRE-PANDEMIC SIMILARLY
EMPLOYING THE SAME NUMBER OF
PEOPLE FOR EXAMPLE IN THIS
SPECIFIC SECTOR, LIKE
HOSPITALITY.
SO IT SOUNDS LIKE YOU HAVE
ADDITIONAL DATA TO LOOK AT THE
NUMBER OF PEOPLE, BUT I'M
WONDERING IF WE ARE SEEING
TRENDS THAT SHOW THAT IN THIS
POST COVID WORLD, FEWER PEOPLE
ARE GETTING HIRED FOR THE SAME
NUMBER AND SAME AMOUNT OF
REVENUE IF WE ARE ABLE TO
FORECAST THAT OUT AND IT SOUNDS
LIKE THE ANSWER -- SORRY, I
DIDN'T MEAN TO CUT YOU OFF.
>> YOU CAN GO AHEAD AND FINISH.
>> IT SOUNDS LIKE WE HAVE THOSE
DATA INDICATORS, BUT ARE WE
GETTING THE FULLER PICTURE OF
WHETHER OR NOT WE CAN DO AN
APPLES TO APPLES COMPARISON IN
TERMS OF NUMBER OF EMPLOYEES
HIRED IN CERTAIN INDUSTRIES
ONCE THEY HAVE DIFFERENT
STANDARDS MET OCCUPANCY,
REVENUE, ETC.?
>> I THINK WE COULD TRY TO
SIMPLY CORRELATE THE LEVEL OF
EMPLOYMENT WITH OCCUPANCY OR
FOR REVENUE.
THE BOTTOM LINE IS I THINK OUR
MEASURE WOULD BE RELATIVELY
CRUDE BECAUSE WE HAVE A MEASURE
OF TOTAL REVENUE AND WE MAY
HAVE SOME OF THE DATA SERVICES,
SOME SENSE OF THE NUMBER OF
ROOMS THAT ARE AVAILABLE FOR
OCCUPANCY, AND WE HAVE MEASURES
OF EMPLOYMENT.
BUT, I THINK MATCHING THOSE AT
THE LEVEL TO DRAW CONCLUSIONS
ABOUT THE PATTERNS, WHICH IS
WHAT YOU ARE DESCRIBING, I
THINK DOUBTING THAT WE WOULD BE
ABLE TO DO THAT IN A MEANINGFUL
WAY, BUT WE CAN THINK THE DATA
CAN GIVE US A BETTER SENSE OF
WHAT YOU WILL SEE, AND WHAT THE
RESOLUTION IS.
HOW WELL WE CAN TRACK THAT, THE
RELATIONSHIP BETWEEN THOSE TWO
THINGS.
>> YEAH, THAT WOULD BE GREAT.
AND I'M WONDERING AS WELL HOW
MANY OTHER SECTORS, THE GROCERY
STORES OR OTHER TYPES OF
SERVICES, SO I JUST APPRECIATE
YOU FLOGGING THAT FOR US
BECAUSE THE EMPLOYMENT DATA MAY
NOT, I MEAN THE REVENUE
GENERATION AND OCCUPANCY AND
THINGS LIKE THAT MAY NOT YIELD
THE SAME NUMBER OF PROJECTED
EMPLOYEES IF WE START TO SEE
TRENDS IN A POST COVID WORLD.
BUT I LOOK FORWARD TO HAVING
THAT CONVERSATION WITH YOU AS
WE CONTINUE TO GET THROUGH THE
DATA OVER THE NEXT FEW YEARS.>>
SOUNDS GOOD.
>> OKAY, SO CONTINUING ON WITH
THE INFLATION FORECAST FOR
SEATTLE METRO AREA, IT IS VERY
CONSISTENT WITH THE NATIONAL
FORECAST, THERE'S AN UPWARDS
TRAJECTORY FOR REGIONAL
INFLATION, FOR CPIU INFLATION,
WE ARE EXPECTING A 7%
INFLATION IN 2022.
FOR THE BASELINE SCENARIO.
WE WERE EXPECTING A SLOWER
RETURN, SO A SHOPPER SHARP DROP
, BACK TO PRE-PANDEMIC LEVELS
OF INFLATION. THERE'S A LOT OF
DOWNSIDE, THE RISK OF HIGHER
INFLATION, FROM THE WAR
CONFLICT, AND LESS OR MORE,
EXPECTED INFLATIONS, WHICH ARE
BECOMING EMBEDDED, KIND OF
SHIFTING HIGHER.
AND IN ADDITION TO THE OVERALL
CPIU INFLATION OR HOUSE PRICE
INDEX, WE ARE EXPECTING A RETURN
, A SLOWER GROWTH. SIMILAR TO
LAST YEAR, THE HOUSE PRICE
INDEX HAS GROWN IN EXCESS OF
20%, AND IT'S CERTAINLY ONE OF
THE REASONS THAT SOME ARE
WORRIED ABOUT POTENTIAL
INDICATIONS, POTENTIAL HOUSING
BUBBLE MIGHT BE FORMING.
NEXT SLIDE.
>> BEFORE WE LEAVE THIS, A
COUPLE OTHER THOUGHTS ON
INFLATION, ONE, I DON'T KNOW
THAT WE MENTIONED IT, INFLATION
WILL HAVE THE EFFECT IN GENERAL
OF INCREASING THE NOMINAL VALUE
OF THE REVENUE FORECAST, SALES
TAXES FOR INSTANCE, AND IF
PRICES GO UP, A NOMINAL VALUE
OF OUR REVENUE WILL GO UP, THE
TAX AND GROSS REVENUES AS
PEOPLE ARE CHARGING MORE FOR
THEIR SERVICES BECAUSE OF
INFLATION.
WE WILL SEE THE CITY'S REVENUE
GROW, BUT IT'S IMPORTANT TO
RECOGNIZE THAT AS A CUSTOMER,
WE ARE PURCHASING SERVICES, WE
ARE HIRING PEOPLE, SO THE SAME
INFLATION THAT IS HELPING BOOST
THE NOMINAL VALUE, THE REVENUE
HAS EVERY INDICATION TO
INCREASE THE COST OF SERVICES,
EITHER THROUGH THE INDIVIDUALS
IT EMPLOYEES OR THE CONTRACTS
THAT IT STRIKES FOR
CONSTRUCTION SERVICES OR FOR
HUMAN SERVICES OR THE LIKE.
SO IT IS A DOUBLE-EDGED SWORD
FOR US.
ANOTHER POINT IS THAT INFLATION
ITSELF, AND THIS IS ONE OF THE
REASONS IT IS RAISING INTEREST
RATES AND PUTTING THE ECONOMY
AT SOME RISK, IN ORDER TO BRING
INFLATION DOWN, IN THE HISTORIC
SENSE, A LONG-TERM PATTERN OF
HIGHER INFLATION WILL ITSELF
REDUCE ECONOMIC GROWTH.
SO INFLATION COULD HAVE AN
IMPACT ON WHAT LEVEL OF
ACTIVITY AS WELL, THE REAL
ACTIVITY AS OPPOSED TO JUST
NOMINAL PRICES.
A COUPLE REASONS WHY INFLATION
IS A CONCERN.>> I WANT TO TALK
ABOUT REVENUE, YOU HAVE SEEN
THE VARYING IMPACTS IN TERMS OF
THE ECONOMIC LEVEL OF THE
DIFFERENT SCENARIOS.
BEFORE WE MOVE ON, I DID WANT
TO PRESENT OUR RECOMMENDATION,
AS WE MOVE FORWARD, WHEN WE
SHOW YOU THE REVENUE LOOKS, WE
WILL SHOW YOU THE DIFFERENT
SCENARIOS, BUT I DID WANT TO
EXPLAIN AND LET YOU KNOW WHAT
OUR RECOMMENDATION IS IN TERMS
OF THE ECONOMIC SCENARIO THAT
SHOULD UNDERLINE THE FORECAST.
AND IN PARTICULAR, RECOMMENDING
THE BASELINE WOULD BE A
CONTINUATION. MAJOR REASONS FOR
THAT, ONE IS THAT, WE JUST
PRESENTED TO YOU, THE NATIONAL
FORECAST HAS INCREASED THE
PROBABILITY OF THE PESSIMISTIC
SCENARIO AND ALSO THE POTENTIAL
SEVERITY, BUT THERE'S NOTHING
IN THAT THAT IS SPECIFIC TO THE
SEATTLE AREA.
THE RISK TO THE NATION IN
GENERAL, AND WE ARE A PART OF
THAT, WHEN COVID FIRST HIT A
COUPLE YEARS AGO, WE FELT
DIFFERENTLY ABOUT THAT, WE
THOUGHT THAT SEATTLE WAS MORE
AT RISK, OUR ECONOMY WAS
POTENTIALLY MORE DEPENDENT ON
THE FACTORS THAT WOULD BE
IMPACTED BY COVID.
BUT AGAIN, THE RISK TO THE
REGION AS THE SAME TO THE RISK
TO THE NATION, BUT ONE REASON
WE ARE COMFORTABLE WITH THE
BASELINE SCENARIO.
ANOTHER THAT WE TALKED ABOUT IS
TO THE EXTENT THAT RELATIVE TO
THE NATION, THERE ARE SOME
PLACES WHERE WE ARE TRAILING IN
TERMS OF RECOVERY FROM COVID.
PARTICULARLY THE LEADER IN
HOSPITALITY, THOSE ARE SECTORS
WHERE WE SEE AN UPSIDE AS COVID
WANES.
SO AGAIN, A REASON TO THINK,
NOT NECESSARILY THE OPTIMISTIC
FORECAST BUT TO THINK THE
BASELINE IS REASONABLE.
BUT, THAT IS OUR RECOMMENDATION.
BUT AGAIN, IN THE NATURE OF
BEING AN ECONOMIST, WE ARE
ALWAYS WORRIED AND OBVIOUSLY
THE EVENTS IN UKRAINE AND
ACTIONS ON THE FEDS SIDE, WE
ARE INCREASING THE EXPECTED
THAT THE FORECAST MAY TURN DOWN
. BUT AT THE MOMENT, THE
BASELINE SEEMS TO MAKE THE MOST
SENSE.
YOU WILL HAVE THE CHANCE TO
TALK ABOUT THAT AS WE WRAP UP
THE PRESENTATION BUT I WANTED
TO MAKE THAT CLEAR AS WE MOVE
INTO THE ACTUAL REVENUE
PRESENTATION.
AND WE WILL DO JUST THAT.
SO TALKING ABOUT REVENUE
SPECIFICALLY.
JUST TO REMIND YOU, THESE ARE
THE REVENUE STREAMS WHICH WE
ARE RESPONSIBLE FOR AND WE WILL
PRESENT TO YOU.
THE VERY SIGNIFICANT RETAIL
SALES AND THE BUSINESS
OCCUPATION TAX, TOGETHER MORE
THAN $600 MILLION. BUSINESS
LICENSES, THAT IS THE FEE THAT
IS CHARGED FOR BUSINESSES AS AN
ANNUAL FEE FOR YOUR BUSINESS
LICENSE, IT IS A GRADUATED FEE,
IT DEPENDS ON HOW LARGE YOUR
BUSINESS IS BUT IT IS A
RELATIVELY MINOR SOURCE, BUT IN
TERMS OF THE WORK WE ARE DOING
IT MAKES SENSE FOR US TO TAKE
THAT AS IT IS LINKED TO
BUSINESS ACTIVITY.
WE ARE FORECASTING THE TAXES ON
SEVERAL PRIVATE UTILITIES, GAS,
STEAM AS AN ENERGY SOURCE, ALSO
CABLE AND TELEPHONE.
NON-GENERAL FUND SOURCES, BUT
ALSO SIGNIFICANT ONES, PAYROLL
EXPENSE TAX.
SO, REVENUES IN 2021 ALMOST
$250 MILLION, VERY SIGNIFICANT
REVENUE SOURCE AND YOU WILL SEE
OUR PROJECTION SHORTLY.
THE TAX ON REAL ESTATE
TRANSACTIONS, AS MUCH AS $100
MILLION SOURCE AND SOME YEARS.
THE ADMISSIONS TAX, THIS IS A
TAX THAT IS SPECIFICALLY
DEDICATED TO SUPPORTING THE
ARTS WITH THE REOPENING, OR THE
OPENING OF CLIMATE PLEDGE ARENA,
SIGNIFICANT REVENUES THERE,
STARTING TO SEE THAT LAST YEAR.
AND WE ARE ALSO RESPONSIBLE FOR
SOME OF THE KEY INPUTS TO THE
PROPERTY TAX FORECAST, THE
BUDGET WILL PRESENT THE
FORECAST, BUT WE ARE PROVIDING
THE INPUTS THAT ARE ESSENTIAL
TO THAT WORK.
SO THAT IS OUR LINEUP IF YOU
WILL, AND AS I INDICATED, WE
WILL SHOW THE BASELINE,
PESSIMISTIC AND OPTIMISTIC FOR
EACH OF THESE AS WE GO FORWARD.
WAS THERE A QUESTION THERE,
DEPUTY MAYOR?
OKAY, DIDN'T WANT TO MISS YOU.
JUST SOME COMMENTS, BEFORE WE
GET INTO THE NUMBERS, JUST A
COUPLE THINGS TO HIGHLIGHT
HERE.
BASICALLY YOUR APPROACH ON THE
SALES, ADMISSIONS TAX, THOSE
ARE LARGELY THE SAME AS WE HAVE
DONE BEFORE, ALTHOUGH YOU WILL
SEE THERE ARE SOME
REQUIREMENTS, ESPECIALLY THE
OUTPUTS FROM THE REGIONAL
ECONOMIC MODEL, THE EMPLOYMENT
AND INCOME AS WE JUST SHOWED
YOU, THEY BECOME INPUTS TO
MODELS THAT HAVE CORRELATED
THOSE MEASURES TO WHAT OUR
REVENUES HAVE BEEN AND WHAT
THEY ARE EXPECTED TO BE.
AND JAN MENTIONED THIS, THERE
WAS A REVISION SEVERAL YEARS
BACK FOR INCOME DATA. WE HAVE
BEEN ESTIMATING THESE MODELS,
CORRELATING REVENUES TO INCOME,
AND FOLKS CAME BACK AND SAID
THOSE MEASURES OF INCOME YOU
WERE USING WEREN'T EXACTLY
RIGHT.
SO THAT LED US TO REESTIMATE
THOSE MODELS TO REESTABLISH AND
REESTIMATE THE RELATIONSHIP, SO
THAT IS SOME WORK WE HAVE DONE.
AND ALSO MENTIONED A COUPLE
TIMES, TO EXPAND THE DATA WE
ARE USING, TAKING ADVANTAGE OF
SOME NEW DATA SOURCES.
ONE OF OUR CHALLENGES IS ALWAYS
TO GET THIS INFORMATION IN REAL
TIME, AS MUCH AS WE CAN.
OPEN TABLE IS ONE INSTANCE
AVAILABLE, AND WE ARE ALSO
LOOKING AT DATA BEING USED ON A
REAL-TIME BASIS TO TRACK
EMPLOYEE'S RETURN TO OFFICE.
HOW MANY FOLKS ARE COMING INTO
DOWNTOWN, FOR INSTANCE.
THAT IS THE KIND OF DATA YOU
SEE, ON THE REPORT FROM THE
DOWNTOWN SEATTLE ASSOCIATION.
IN TERMS OF PROPERTY TAX, I
HAVE BEEN DOING SOME WORK IN
THIS AREA.
RECENTLY WAS CONSULTING WITH
THE COUNTY FORECAST OFFICE, AND
I SEE SOME OPPORTUNITIES FOR
COLLABORATION THERE.
WHICH LINKING THOSE FORECASTS
TO OUR OWN FORECAST OF TAXABLE
SALES ACTIVITY. AND ALSO WE ARE
REACHING OUT TO SOME FIRMS, SO
I JUST WANTED TO GIVE YOU A
SENSE OF WE ARE MOVING FORWARD
TO REFINE OUR APPROACH TO THE
FORECAST AS WE GO.
I DID WANT SUMS TO SPEND SOME
TIME TALKING ABOUT THE PAYROLL
TAX, IT CAN BE A REAL CHALLENGE
, SO JUST TO REMIND YOU, LAST
YEAR WAS THE FIRST YEAR WE
COLLECTED THE TAX.
ALL THE MONEY WAS PAID IN
JANUARY AND FEBRUARY, SO UNTIL
THEN WE DIDN'T KNOW FOR SURE
HOW MUCH WE WERE TAKEN.
WE DID QUITE WELL, THE FINAL
PAYMENTS EXCEEDED OUR FORECAST
BY 25% ALMOST, WE HAVE BEEN
PROJECTING ABOUT 200 MILLION
FINAL PAYMENTS, 248 MILLION,
NOT IDEAL. THE SHIFT IN 22,
THIS YEAR PAYMENTS WILL START
COMING IN QUARTERLY, WE HAVEN'T
YET RECEIVED THOSE, THEY WILL
BE DUE AT THE END OF THIS
MONTH, AT THE END OF APRIL, THE
FIRST QUARTER PAYMENTS ARE DUE,
SO BY THE MIDDLE OF MAY OUR
PROCESS WILL HAVE SOME SENSE OF
THAT.
WE WILL HAVE AT LEAST THE FIRST
QUARTER DATA, AND MAYBE SOME OF
THE SECOND, ALSO INFORMATION
FROM EMPLOYMENT SECURITY.
BUT THAT'S STILL NOT A LOT OF
INFORMATION, FOR SALES, WE HAVE
50 YEARS OF TRACK RECORD, AND
HERE JUST BY THE NATURE OF THE
DUE TAX, WE DON'T.
ANOTHER THING THAT MAKES IT
CHALLENGING, JUST TO GIVE YOU A
SENSE OF UNDERSTANDING WHAT WE
ARE WORKING THROUGH, ONE OF THE
THINGS FROM LAST MONTH IS THAT
THE PAYROLL EXPENSE TAX IS
COMING FROM A RELATIVELY NARROW
TAX, NARROW DATES.
RELATIVELY FEW FIRMS IN
RELATIVELY FEW SECTORS.
AND IN SOME WAYS, PROJECTING
THE OVERALL ECONOMY CAN BE
EASIER THAN PROJECTING THE
GIVEN BEHAVIOR OF ANY SECTOR.
PROBABLY THE BIGGEST THING THAT
IS GOING TO BE ANOTHER
CHALLENGE FOR US IS THE WORK
FROM HOME DYNAMIC.
THE SECTORS THIS MONEY IS BEING
GENERATED IS INFORMATION
TECHNOLOGY AND BUSINESS
PROFESSIONAL SERVICES.
THE SECOND ONE IS WE THINK IT'S
A VERY HIGH PERCENTAGE THAT
WORK FROM HOME.
WHAT WE KNOW IS THE MONEY WE
TOOK IN INTO THE 21 IS NOT
LIKELY TO BE REPRESENTATIVE OF
THE PATTERN WE WILL HAVE GOING
FORWARD.
FOLKS WHO USED TO COMMUTE OUT
OF THE CITY, WHO WERE AT HOME
ARE SUBJECT TO THE TAX IN 21
AND THE PEOPLE WHO ARE USED TO
COMMUTING INTO THE CITY WOULD
HAVE BEEN SUBJECT TO TAX IF
THEY WERE IN THEIR HOME
OFFICES, BUT THEY WERE NOT.
SO WHAT HAPPENED IN 21 WAS NOT
WHAT WE WILL EXPECT IN THE
FUTURE.
AND FROM THE FORECAST SIDE, I
DON'T THINK 2022 WILL BE
EXACTLY THE STATE HIGH, WE ARE
EXPECTING TO SEE A TRANSITION
HERE BACK TOWARD WORK IN THE
OFFICE.
ALTHOUGH TO DATE WE HAVE SEEN
RELATIVELY LITTLE OF THAT
TRANSITION.
BUT AGAIN, AS WE COME TO THE
FORECAST, WILL HAVE PERHAPS A
BETTER SENSE OF HOW THAT
EVOLVES.
I JUST WANT TO GIVE YOU THE
SENSE, WE DON'T HAVE A LOT OF
EXPERIENCE HERE, AND THE DATA
ARE LIMITED.
SO, THAT SAID, WE OBVIOUSLY
NEEDED TO ADJUST THE 22
FORECAST IN THE FORECAST GOING
FORWARD FOR THE REALITY OF HOW
MUCH WE TOOK IN INTO THE 21.
SO THERE IS A NOTABLE UPPER
SHIFT IN THE FORECAST BECAUSE I
THINK WE UNDERSTAND THE TAX
BASE A LITTLE BIT BETTER, BUT
THIS IS ONE THAT WE WILL
CONTINUE TO REFINE AS WE
COLLECT EVERMORE INFORMATION
THROUGH THE COURSE OF THIS YEAR
AND INTO THE NEXT AS WELL.
>> THANK YOU DIRECTOR NOBLE.
BEFORE WE MOVE ON, I JUST
WANTED TO TAKE A QUICK SECOND
TO SAY THANK YOU TO DIRECTOR
GLENN LEE AS WELL, FOR THE
IMPLEMENTATION OF THE JUMPSTART
PAYROLL TAX, ALSO APPRECIATE
THE COMPANIES WHO PROVIDED
FEEDBACK DURING THE RULEMAKING.
I THINK THAT HELPED TO ENSURE
THAT THERE WAS AN EFFECTIVE WAY
TO INCORPORATE THEIR FEEDBACK
PRIOR TO ANY APPLICATION OF THE
ASSESSMENT. SO I THINK THAT LED
TO SOME MINOR BUT IMPORTANT
CHANGES IN TERMS OF OUR
REPORTING AND JUST WANTED TO
PAUSE REAL QUICKLY TO THANK
THEM AND ALSO INVITE FAS AS
WELL IF THEY WANTED TO. BUT
BEFORE THAT, SENIOR DEPUTY
MAYOR, PLEASE GO AHEAD.
>> YEAH, I JUST WANTED TO --
I'M GLAD YOU JUMPED IN, BUT I
JUST WANTED TO ACTUALLY THANK
YOU, COUNCILMEMBER FOR YOUR
LEADERSHIP ON THE JUMPSTART TAX.
IT IS CERTAINLY SHOWING THE
DIVIDENDS OF THE HARD WORK YOU
HAVE PUT IN AND REALLY
MEANINGFUL TO THE CITY,
MEANINGFUL TO HOW THE CITY
PROPS UP ITS BUDGET AND I JUST
WANTED TO THANK YOU FOR THE
WORK.
THIS IS REALLY GOOD NEWS.
I KNOW IT STILL UNCERTAIN FROM
A FORECASTING PERSPECTIVE.
BUT THIS IS CRITICAL REVENUE
THAT A GROWING CITY LIKE
SEATTLE NEEDS.
SO I JUST WANTED TO ACKNOWLEDGE
YOUR LEADERSHIP HERE.
>> THAT IS VERY MUCH
APPRECIATED, THANK YOU VERY
MUCH SENIOR DEPUTY MAYOR.
ANY ADDITIONAL COMMENTS?
>> I GUESS WE ARE STILL ANXIOUS
TO GET A COUPLE MORE QUARTERS
UNDER OUR BELT TO SEE HOW THE
FIRMS FULLY INCORPORATE THIS
TAX INTO THEIR BUSINESS MODELS.
WE ARE COMFORTABLE WITH THE
SEVERAL FIRMS WE HAVE SPOKEN TO
IN DETAIL ABOUT WHAT THEY DID,
THERE IS A REAL EFFORT TO
COMPLY.
BUT UNTIL WE HAVE A COUPLE MORE
QUARTERS WHERE WE FEEL
COMFORTABLE THAT WE ARE IN A
STABLE SITUATION WITH THE TAX
BASE, YOU KNOW IT TAKES TIME
FOR PEOPLE TO SORT STUFF OUT
FRANKLY.
AS WELL AS THE UNCERTAINTY OF
THE RETURN TO WORK IMPACT.
SO I THINK WE COULD HAVE SOME
VOLATILITY HERE, FOR ONE.
>> AND BEFORE I LEAVE THIS, I
JUST WANTED TO EXTEND MY THANKS
TO DIRECTOR LEE AS WELL, A
COLLABORATION BETWEEN OUR
OFFERINGS OFFICES AND STAFF, WE
WERE DOING THAT ON A WEEKLY AND
SOMETIMES DAILY BASIS.
AND AS WE HAVE BEEN SETTING UP
THE NEW OFFICE AND ESTABLISHING
THOSE WORKING RELATIONSHIPS HAS
BEEN REALLY IMPORTANT.
I APPRECIATE THAT
COLLABORATION.>> YOU BET.
>> SO, AS PROMISED, WE WANTED
TO SHOW YOU FROM A REVENUE
PERSPECTIVE, WHAT WOULD IT MEAN
TO ADAPT THE BASELINE SCENARIO,
AND POTENTIALLY ADOPT ONE OF
THE OTHER TWO.
WE HAVE A COUPLE SLIDES HERE,
ONE SHOWING THE PATTERN OVER
TIME.
BUT LET ME TURN THIS BACK TO
JAN.>> THANKS.
SO, THIS SLIDE FOCUSES ON 2023
AND COMPARES THE REVENUE
FORECAST FOR THE THREE BIGGEST
SOURCES FOR RETAIL, SALES TAX
AND PAYROLL EXPENSE TAX.
SIGNIFICANT SOURCES THAT WE ARE
RESPONSIBLE FOR FORECASTING.
AS YOU CAN SEE, THE DIFFERENCES
IN THESE SCENARIOS ARE QUITE
LARGE, IN PARTICULAR THE
DIFFERENCE BETWEEN THE BASELINE
AND THE PESSIMISTIC SCENARIOS
OF THE DOWNSIDES, CONSIDERABLE
OFFER TO THE 23, THE COMBINED
REVENUE DIFFERENCE BETWEEN
THOSE TWO SCENARIOS IS 54
MILLION, JUST ABOUT 5.7% FOR
2022, THE DIFFERENCE IS
SLIGHTLY SMALLER, STILL 3.4% OF
THE OVERALL COMBINED. THE
UNCERTAINTY HERE IS CONSISTENT
WITH THE UNDERLINING FORECAST,
THE UNCERTAINTY HERE IS COMING
FROM THE OUTLOOK FOR IMPLEMENT
OVERALL, AND MORE SPECIFICALLY
THE OUTLOOK FOR THE LEISURE AND
HOSPITALITY SECTOR, AND IN
ADDITION TO THAT, WE DON'T HAVE
A SLIDE TODAY ON THE
CONSTRUCTION SECTOR, BUT WE
PRESENTED IT LAST TIME. THE
PERMITS ISSUED, THE OVERALL
VALUE, FORESHADOWING A SLOWDOWN
IN THE CONSTRUCTION SECTOR
RELATED TO THE TAX SERVER NEW
IN SALES, AND THAT IS A PART OF
THE DIFFERENCE BETWEEN THE
BASELINE AND THE PESSIMISTIC
SCENARIO HERE.
FOR PAYROLL EXPENSE, PAYROLL
TAX FORECAST HAS BEEN
DISCUSSED, BUT WE HAVE VERY
LITTLE INFORMATION REGARDING
THE TAX BASE, SO THAT IS THE
SOURCE OF THE DIFFERENCES
BETWEEN THOSE SCENARIOS.
TRYING TO COME UP WITH AN
EDUCATED GUESS HOW DIFFERENT
THE OUTCOME MIGHT BE IN THESE
DIFFERENT SCENARIOS.
BUT LIKE I MENTIONED BEFORE, IN
THE PESSIMISTIC SCENARIO, THE
BIGGEST IMPACT OF THE
PESSIMISTIC SCENARIO ON
INFORMATION SERVICES AND
PROFESSIONAL BUSINESS SERVICES,
AND THOSE ARE THE ONES THAT ARE
RESPONSIBLE AGAIN AS WE WILL
DISCUSS FOUR A MAJORITY OF THE
REVENUE PAYROLL EXPENSE TAX
REVENUE.
MOVING ONTO THE NEXT SLIDE.
>> EVEN THE JUMPSTART PAYROLL
EXPENSE TAX PROJECTIONS MAKES
ME OPTIMISTIC.
SO I APPRECIATE THAT WE ARE
STILL COLLECTING ADDITIONAL
INFORMATION, BUT THANKS AGAIN
SENIOR DEPUTY MAYOR FOR
ACKNOWLEDGING THE ROLE THIS IS
HAVING AND KEEPING US IN THE
CRITICAL SERVICES FOR THE CITY
AND EMPLOYEES, I APPRECIATE
THAT.
I KNOW MORE INFORMATION WILL
COME IN, BUT AGAIN EVEN LOOKING
AT THAT PESSIMISTIC APPROACH,
IF THAT WERE TO BE CONSIDERED,
ASKED ME VERY OPTIMISTIC ABOUT
ADDITIONAL FUNDS COMING IN.
SO THANKS AGAIN.
>> BEFORE YOU CONTINUE, CAN I
ASK A QUICK QUESTION?
YOU MENTIONED THAT THE PERMITS
ARE SLOWING, I'M CURIOUS IF
THAT IS BEING SEEN ACROSS
RESIDENTIAL AND COMMERCIAL?
OR IF ONE IS MORE THAN THE
OTHER?
>> THE BIGGEST IMPACT WAS ON
THE COMMERCIAL PERMITS, THE
RESIDENTIAL, THERE IS STILL A
QUITE BIG DEMAND FOR
DEVELOPMENT OF MULTIFAMILY
RESIDENTIAL BUILDINGS, THE
COMMERCIAL PERMITS ARE THE ONES
THAT HAVE FALLEN.
SO, LET'S MOVE TO THE NEXT
SLIDE.
GOING BEYOND 23, OR SHOWING
LONGER-TERM IMPACT, ON OUR
DIFFERENCES BETWEEN THESE
SCENARIOS, AGAIN, FOCUSING ON
THOSE THREE LARGEST SOURCES OF
REVENUE, RETAIL SALES TAX,
EXPENSE TAX. AGAIN, THE
UNDERLYING FORECAST, THERE IS A
LARGE DOWNSIDE RISK AND THE GAP
BETWEEN THE BASELINE AND THE
OPTIMISTIC SCENARIO IS
RELATIVELY SMALL, THAT FEEDS
INTO THE REGIONAL FORECAST, AND
THAT FEEDS INTO THE REVENUE
FORECAST, THE DOWNSIDE RISK IS
MUCH LARGER COMING FROM THE
ADDITIONAL SOURCES OF
UNCERTAINTY OR REGARDING THE
CONSTRUCTOR SECTOR OUTLOOK
REGARDING LEISURE AND
HOSPITALITY AND REGARDING
INFORMATION SERVICES AND
PROFESSIONAL BUSINESS SERVICES,
HOW THEY MIGHT BE IMPACTED IN
THE PESSIMISTIC SCENARIO.
>> I WANTED TO GIVE YOU MORE
THAN A ONE YEAR SNAPSHOT TO
GIVE YOU A SENSE OF WHAT THOSE
DIFFERENT SCENARIOS MIGHT
OUTLINE.
>> I'M GOING TO SHIFT FOR A
MOMENT AND TALK ABOUT SOME
RELATIVELY MORE MINOR REVENUE
STREAMS, AGAIN THAT WE WANTED
TO SHARE WITH YOU FOR THE FULL
SET FORECAST HERE.
CABLE AND TELEPHONE, THE CITY
TAXES CABLE AND SELL OF
TELEPHONE, BUT THEY ARE EACH
ABOUT LESS THAN $15 MILLION
EACH.
THEY HAVE BOTH BEEN IN A
PATTERN OF RELATIVELY LONG-TERM
DECLINE.
THAT IS CORD CUTTING IN THE
CONTEXT OF CABLE AND MOVING
AWAY FROM TALKING ON THEIR
PHONES TO JUST TEXTING AND
SHARING DATA IN OTHER FORMS.
THE TEXT THAT WE COLLECTED IS
ONLY ON THE VOICE COMPONENT OF
TELEPHONE.
SO, THE FORECAST HERE,
ESSENTIALLY CONTINUING THE
PROJECTED, THE DECLINE THAT WE
ARE SEEING CONTINUE, AT A
SLIGHTLY LOWER RATE GOING
FORWARD.
AT SOME POINT WE EXPECT THESE
THINGS TO LEVEL OFF, THERE HAS
BEEN NO SIGN OF THAT YET.
SO ON TOP HERE, YOU CAN SEE
TELEPHONE, AND YOU SEE THE
THREE SCENARIOS, THERE'S A LOT
OF DIFFERENCE BETWEEN THE
SCENARIOS BECAUSE THE DECLINE
ISN'T RELATED TO BROADER
ECONOMIC TRENDS, IT'S REALLY
JUST CHANGES IN BEHAVIOR.
SO I WOULDN'T EXPECT A BIG
DIFFERENCE DEPENDING ON THE
OVERALL ECONOMIC PATTERNS.
ONE THING I WOULD NOTE ON THE
CABLE, YOU CAN SEE THE DATA, IT
APPEARS THERE WAS A BIG
RECOVERY IN 21, THAT IS A
FIGMENT, OR RESULT OF THE
TIMING OF PAYMENTS.
IN 2021, OR ACTIVITY IN 2020,
IF YOU DRAW THE LINE THROUGH
THAT JARGON IS, YOU GET THE
LONG-TERM TREND THAT IS
ESSENTIALLY CAPTURED IN THE
FORECAST.
SO, WE REALLY HAVE BEEN
DECLINING, WE WILL CONTINUE TO
MONITOR THAT AND SEE WHETHER
THAT CONTINUES.
BUT AGAIN, THEY ARE NOT MAJOR
REVENUE SOURCES, SO IT'S
OBVIOUSLY NOT THE BIGGEST
IMPACT ON THE OVERALL PICTURE
EITHER.
NEXT UP, JUST A FEW COMMENTS
ABOUT OTHER REVENUE STREAMS AND
SOME GRAPHICS TO FOLLOW-UP. I
WILL TURN THIS BACK TO JAN.
>> GREAT, SO LOOKING AT A
COUPLE OF REVENUE SOURCES, FOR
THE ADMISSIONS TAX, WE HAVE NOT
SEEN ANY INFORMATION THAT WOULD
WARRANT A BIG REVISION OF
REVENUE FORECAST SO WE ARE
GOING TO KEEP AN EYE ON ALL THE
INFORMATION REGARDING LEISURE
AND HOSPITAL SECTOR, AND HOW
THAT IS EVOLVING AND WE MIGHT
COME WITH MORE SIGNIFICANT
MATERIAL REVISIONS TO THE
FORECAST. BUT RIGHT NOW THERE IS
NOTHING THAT WOULD JUSTIFY
MAJOR REVISIONS FOR ADMISSIONS
TAX.
>> JUST REAL QUICK, FOR SOME
CONTEXT, WHEN WE DID THE
NOVEMBER FORECAST, WE WERE
ANTICIPATING THAT COVID WOULD
WANE AND THERE WOULD BE SOME
PICKUPS, OBVIOUSLY THAT IS
SOMETHING THAT IS HAPPENED IN
THE PAST FEW MONTHS, THAT WAS
AN EXPECTATION IN THE FORECAST,
ONE OF THE REASONS WE ARE NOT
CHANGING, WHAT YOU SEE IN
SUBSTANCE IS WHAT WE HAVE
EXPECTED.
OMICRON WAS AN UNEXPECTED PIECE
BUT ITS EFFECTS SEEM TO BE
WANING.
JUST TO GIVE YOU THAT CONTEXT,
WE WERE ALREADY ANTICIPATING
SOME LEVEL OF RECOVERY HERE.
>> AND THE EFFECT OF OMICRON
HAS FADED QUITE FAST.
SO THE CONSUMER HAS BOUNCED
BACK QUITE QUICKLY.
FOR NATURAL GAS AND STEAM, THE
REVENUE IS MOSTLY TRACKING THE
DEVELOPMENT IN THE RISING
ENERGY PRICES, WHICH HAVE BEEN
RISING, AS THESE REVENUES HAVE
BEEN REVISED, AND FURTHER
ESCALATION COULD RESULT IN THE
FURTHER UPWARDS REVISION FOR
THE REVENUE STREAMS.
FINALLY, THE REAL ESTATE TAX
REVENUE HAS BEEN REVISED MORE
SIGNIFICANTLY FOR 2022 AND 2023
, A BIT OF A WORRY HERE IS
COMING FROM THE POTENTIAL IMPACT
OF A TIGHTENING MONETARY PUZZLE
POLICY, LEADING TO FEWER HOUSES
BEING SOLD, THERE'S ALREADY A
VERY SLIM INVENTORY AND THE
HOUSING PRICES HAVE BEEN RISING
QUITE FAST.
THERE'S SOME REASONS TO BELIEVE
THAT IT WILL LEAD TO A DECLINE
IN REVENUE, THAT IS WHAT THIS
FORECAST IS EXPECTING.
IF WE CAN GO TO THE NEXT SLIDE.
>> CAN I ASK ONE QUESTION
AROUND THE NATURAL GAS AND
STEAM?
AREN'T WE PULLING AWAY FROM
NATURAL GAS AS A RESOURCE, IT
SEEMS LIKE STEAM MAY
POTENTIALLY BE THREATENED AS AN
ENERGY SOURCE IN OUR CORE AREA
WITH SOME NEW DEVELOPMENT.
ARE THERE ANY KIND OF FEELINGS
THAT THOSE TWO ENERGY SOURCES
MIGHT BEGIN TO GET OUTDATED A
LITTLE BIT SOONER THAN THE NEXT
COUPLE OF YEARS PROJECTIONS?
WE MIGHT BE LOOKING FOR NEW
ENERGY SOURCES THAT WOULD FACE
SOME OF THOSE OUT?>> THE
REVENUE IS A FUNCTION OF BOTH
PRICE AND QUANTITY, SO A
DECLINE IN QUANTITY MEANS
OVERALL THE REVENUE WOULD BE
DECLINING.
SO, THERE HAS BEEN AN UPWARDS
REVISION COMPARED TO THE
PREVIOUS FORECAST, BUT THAT
DOES NOT MEAN THAT WE ARE
FORCING SIGNIFICANTLY RISING
REVENUE FROM THESE SORT OF
STREAMS.
>> AND I THINK WHAT YOU
IDENTIFIED, PROBABLY WOULD BE
LONGER-TERM, OUR FORECAST IS
MAINLY 22, 23, 24, IT IS A SIX
YEAR FORECAST, BUT THE
INFRASTRUCTURE SHIFT, MOVING
AWAY FOR INSTANCE FROM NATURAL
GAS AS A HEATING SOURCE WOULD
BE SIGNIFICANT, BUT THE CITY
HAS AN INSIGNIFICANT CAPITAL
SOURCE IN THAT, THEY HAVE
CONVERTED THEIR ENERGY SOURCE,
CONVERTING TO ELECTRICITY.
SO THAT IS THE OTHER ISSUE I
WOULD SAY, THE DEMAND FOR
ENERGY, IT COULD BE SHIFTING
TOWARDS NATURAL GAS AND
ELECTRICITY FOR INSTANCE, FOLKS
WHO LIVE OFF GAS, A HEAT PUMP
FOR EXAMPLE WOULD THEN SHIFT TO
ELECTRICITY, JUST TO BE A
REVENUE GUIDE, WE DO TAX AS
WELL.
MY GUESS IS THAT THE REVENUE
FROM THAT USE OF ENERGY IS NOT
LIKELY TO DECLINE.
SOLAR, IF YOU ARE COLLECTING IT
YOURSELF.>> I THINK THAT
ANSWERS MY QUESTIONS, A NEED
FOR ENERGY, PEOPLE WILL STILL
TAX IT.
I APPRECIATE THAT, THANK YOU.
>> AND THIS NEXT SLIDE
ILLUSTRATES THOSE RESOURCES, IT
GIVES YOU A SENSE OF THE
RELATIVE SIZE AS WELL, THE
SCALES ARE ALL THE SAME, I
DON'T KNOW IF YOU WANT TO ADD
ANYTHING.
>> NO, NOT REALLY, I THINK WE
CAN MOVE ON, UNLESS THERE ARE
QUESTIONS.
SO, THE NEXT SLIDE, A LITTLE
BIT ABOUT VALUE AND
CONSTRUCTION, ONE THING TO
REMEMBER ABOUT PROPERTY TAX IS
THAT AS CONSTRUCTION CHANGES IN
VALUE, WE ACTUALLY DON'T CHANGE
OUR REVENUE.
IN MOST OTHER STATES, AS
PROPERTY VALUES CHANGE, TAX
REVENUES CHANGE BECAUSE
MUNICIPALITY IS SET AS A TAX
RATE, AND THE VALUE OF YOUR
HOUSE GOES UP, THEN YOU PAY
MORE TAX.
IN WASHINGTON STATE, IN SOME
WAYS IT WORKS THE OPPOSITE, BUT
WE TELL THE ASSESSOR HOW MUCH
REVENUE WE WANT TO COLLECT, HE
OR SHE FIGURES OUT WHAT THE
PROPERTY IS WORTH, AND DOES THE
DIVISIONS TO FIGURE OUT WHAT
THE TAX RATE SHOULD BE AND THEN
WE ARE ALLOWED TO CHANGE THE
PROPERTY TAX BUT IT'S VERY
LIMITED, WE GET 1% MORE THAN
THE PREVIOUS YEAR AND AGAIN,
THAT DOESN'T MATTER THE VALUE,
AND IT WORKS THE OTHER WAY TOO.
IF IT DROPS, WE CAN INCREASE
TAX REVENUE BY 1% THE PREVIOUS
YEAR.
WHERE WE DO GET BENEFIT IS FROM
NEW CONSTRUCTION, ADDING TO THE
TAX BASE AND ADDS TO OUR
PROPERTY TAX REVENUE, AND WE
HAVE BEEN IN A SIGNIFICANT
BUILDING BOOM FOR THE PAST
DECADE, SO ON AVERAGE WE HAVE
BEEN ADDING ALMOST 1.8% TO OUR
ASSESSED VALUE EACH YEAR, SO
THE REVENUE HAS BEEN GROWING BY
2 1/2 OR MORE PERCENTAGE, SO
AGAIN, THE NEW CONSTRUCTION HAS
BEEN VERY SIGNIFICANT.
SO IT'S AN IMPORTANT COMPONENT
GOING FORWARD. THE FORECAST
HERE, WHAT WE SAW IN TERMS OF
VALUE AND CONSTRUCTION, THERE
WAS A DOWNTURN, THIS IS
IMPORTANT TO NOTE HERE, I PUT
THIS GRAPH UP AS THE YEAR THAT
THE TAXES WERE COLLECTED, THERE
IS A LITTLE BIT OF A LAG.
WE ACTUALLY SAW, THE FACT THAT
THE 2020 NUMBER IS A REFLECTION
THAT NEW CONSTRUCTION ACTIVITY
SLOWED IN 2019, BEFORE THE
PANDEMIC, WE WERE ALREADY
SINGING THE SLOWING IN
CONSTRUCTION.
THE FORECAST BEGAN FEEDING FROM
THE FORECAST OF CONSTRUCTION
ACTIVITY, WHICH IN TURN FROM
THE INFORMATION ABOUT THE
BUILDING PERMITS.
ESSENTIALLY WE ARE GOING TO BE
TREADING WATER IN SOME SENSE,
POTENTIALLY LONGER-TERM AS
INTEREST RATES AND DEMAND PICKUP
. BUT, STILL EVEN AT THAT
SLOWER RATE, STILL SIGNIFICANT
ADDITIONS TO OUR TAX BASE, SO
THE FORECAST IS ABOUT 1.4%
WITHIN THE NEXT 6 YEARS ON
AVERAGE.
THERE IS SOME RISK ON THE
CONCRETE, A MINOR ADJUSTMENT
RECOGNIZING AT THAT POINT THE
EFFECT OF CONSTRUCTION ACTIVITY
AND PROJECTS ARE THE KEY TO
ADDING TO THE ASSESSED VALUE
AND THE CONSTRUCTION ACTIVITY
BE COMPLETED. AND YOU CAN SEE
HERE, THE VARIATION ACROSS THE
DIFFERENT SCENARIOS, THESE ARE
LINKED ENTIRELY TO OUR FORECAST
OF CONSTRUCTION ACTIVITY UNDER
THE DIFFERENT SCENARIOS.
SO, THAT IS THE LAST PIECE OF
EXPLAINING THE COMPONENTS.
THIS FINAL TABLE IS A LITTLE
BIT MORE PAINFUL, THE SUMMARY
OF THE FORECAST.
AND I DO WANT TO TAKE THE TIME
TO WALK YOU THROUGH THIS AND
HIGHLIGHT THE CHANGE RELATIVE
TO NOVEMBER IN PARTICULAR, TO
GIVE YOU A SENSE OF 2022 AND
2023, SO WORKING FROM THE TOP,
BUSINESS AND OCCUPATION TAX
REVENUES, WE HAD PROJECTED IN
NOVEMBER, THIS YEAR WE HAVE
BEEN TAKING 317, THE UPDATED
FORECAST PUSHES THAT ABOVE 330
MILLION.
SO, NONTRIVIAL INCREASE
OVERALL, 3% OR THAN WE WOULD
OTHERWISE EXPECT.
AND YOU SEE CONTINUED PROJECTED
GROWTH FOR BOTH 2023 AND 2024,
THESE ARE IN MILLIONS OF
DOLLARS, JUST TO BE CLEAR.
BUSINESS LICENSE FEES, WE
BROUGHT THE FORECAST DOWN
SLIGHTLY FOR 2020.
2021, WE HAD OVERESTIMATED,
AGAIN, WE LOST A FEW BUSINESSES
AND AS BUSINESSES SHRINK, THEY
POTENTIALLY PAY A LITTLE BIT
LESS BECAUSE THE BUSINESS FEES
RELATED TO THE SIZE OF THEIR
REVENUE.
NOT A MATERIAL CHANGE IN THE
BIGGER PICTURE.
RETAIL SALES FORECASTED UP
SLIGHTLY AGAIN.
ONE THING TO REMEMBER ABOUT
RETAIL SALES, YOU MIGHT THINK
THAT AS THE PANDEMIC ENDS, WE
SEE MORE RAPID GROWTH HERE.
ONE THING TO REMEMBER IS THAT
CONSUMER ACTIVITY HAS BEEN
QUITE STRONG THROUGH THE
PANDEMIC BUT THE STIMULUS
WORKED, BUT THE STIMULUS IS
FADING AND THAT IS THE SOFT
LANDING CHALLENGE THAT FACES
THE FEDS.
SO YOU MIGHT GUESS THAT WE ARE
GROWING FASTER, BUT YOU HAVE TO
REMEMBER THAT WE WERE PROPPED
UP PRETTY WELL BY THE PANDEMIC
STIMULUS. RETAIL SALES,
CRIMINAL JUSTICE, THIS IS
LISTED SEPARATELY BECAUSE THIS
IS A SALE TAX THAT WE SEE THE
SHARE OF, IT IS COLLECTED ON A
COUNTYWIDE BASIS.
IT HAS TO BE FORECASTED
DIFFERENTLY, BUT AGAIN, THE
GOOD NEWS THERE. AND CONTINUED
GROWTH EXPECTED IN 23 AND 24.
SO THOSE ARE SOME OF THE LARGER
GENERAL FUND SOURCES, THERE ARE
OTHER MORE MINOR GENERAL
SOURCES, CABLE TELEVISION, IT
IS A DECLINING REVENUE STREAM,
YOU MIGHT ASK, WHY DID YOU
RAISE THE FORECAST?
THE ANSWER IS THAT THERE WERE
SOME PAYMENTS THAT CAME IN IN 22
THAT REALLY SHOULD HAVE BEEN FOR
21, SO THERE HAS BEEN A BUMP
THERE IN TERMS OF THE PAYMENTS.
THE UNDERLYING ACTIVITIES IS
CONTINUING TO DECLINE.
AND THAT EXPLAINS THE FIGURES
FOR 23 AND 24, WHICH CONTINUES
THAT MODEST DECLINE.
CELL PHONE, SIMILAR STORY, IN
THIS CASE, CAME IN BELOW THE
FORECAST, SO WE BROUGHT DOWN
THE FIGURES FOR 2022..
A COUPLE OTHER UTILITIES WE
TALKED ABOUT, THE BOTTOM LINE
IS FOR 2022, FOR THIS YEAR,
THERE IS A NET ADDITION IN THE
FORECAST FOR THE GENERAL FUNDS
ASIDE FROM $32.5 MILLION, THAT
IS ADDITIONAL REVENUE THAT WE
DID NOT ANTICIPATE IN NOVEMBER.
I WANT TO HIGHLIGHT THAT THIS
ISN'T A COMPLETE GENERAL FUND
PICTURE EVEN ON THE REVENUE SIDE
, THE OFFICE IS RESPONSIBLE FOR
SOME OF THE OTHER REVENUE
STREAMS.
FOR INSTANCE THE CITY
UTILITIES, THEY HAVE VERY CLOSE
RELATIONSHIPS WITH THOSE, THAT
MAKES THEM NATURAL FOR THAT
ROLE.
BUT WHEN THE DIRECTOR GETS YOU
THE FULL PICTURE AT THE FINANCE
COMMITTEE IN A COUPLE WEEKS,
YOU WILL SEE THAT.
THIS IS A FULL SNAPSHOT OF OUR
PICTURE BUT NOT THE ENTIRE
STORY.
AND AGAIN, YOU SEE OVERALL,
RELATIVE TO NOVEMBER, WE
INCREASED REVENUE FORECAST BY
MORE THAN 5.5%, NO SMALL PART
OF THAT, THE ACTUAL REVENUE FOR
2021 CAME IN ABOVE, AND ALSO
THE PROJECTIONS ARE UP SLIGHTLY
AT NATIONAL AND REGIONAL AND
ECONOMIC LEVEL.
AND AGAIN, YOU CAN SEE THE
FORECASTED GROWTH OVERALL IN 23
AND 24 AS WELL.
LET'S TALK ABOUT SOME OF THE
KNOWN GENERAL FUND SOURCES, THE
FIRST TWO BEING THE MOST
SIGNIFICANT, THE PAYROLL
EXPENSE TAX, THE ACTUAL
REVENUE, WE HAD PROJECTED
REVENUE FOR ABOUT 200 MILLION
IN 2021, IT CAME IN AT 248.
PROJECTIONS IN NOVEMBER WERE
JUST OVER, WELL JUST UNDER 234
MILLION.
GIVEN WHAT WE SAW IN 21,
UPGRADED SIGNIFICANTLY, 277.5,
SO AN INCREMENT OF MORE THAN
43.5 MILLION IN THAT PARTICULAR
REVENUE STREAM FOR 2022.
THAT IS IN ADDITION TO THE
ADDITIONAL REVENUES THAT WERE
COLLECTED IN 2021.
AND WE ARE EXPECTING
SIGNIFICANT GROWTH IN THE
REVENUE STREAM IN 23 AND 24,
AGAIN, ANTICIPATION THAT THE
INFORMATION AND PROFESSIONAL
SERVICES SECTOR WILL CONTINUE
TO DO WELL. WHAT'S DRIVING
REVENUE IS BOTH EMPLOYMENT AND
WAGES, IT IS A COMBINATION OF
THE NUMBER OF JOBS AND THE
WAGES BEING PAID.
REAL ESTATE SALES TAX, AGAIN,
SIGNIFICANT UPGRADE IN THE
FORECAST FOR 2022. AT LEAST IN
PART FROM THE RESULTS OF 2021
WHICH OUTPACED OUR FORECAST BY
ABOUT THE SAME MARGIN, ABOUT 10
MILLION.
AS WE EXPLAINED, THE MODELS
INDICATE THAT INTEREST RATE
INCREASES, HAS THE POTENTIAL TO
SLOW THE PRICE AND QUANTITIES
OF REAL ESTATE TRANSACTIONS.
SO WE ARE PROJECTING SOMEWHAT
LOWER LEVELS FOR 23 AND 24, AND
I WOULD NOTE AND PERHAPS IT'S
STILL CONFUSING, THOSE WILL
STILL BE ABOVE THE FORECAST WE
HAD IN NOVEMBER.
WE WERE PROJECTING A SIMILAR
PATTERN IN NOVEMBER, THAT IS
HIGHER REVENUES IN 21 AND 22
AND A SLOW DROP OFF AS THE REAL
ESTATE MARKET COOLS SOMEWHAT,
IF YOU WILL.
SO, SAME PATTERN BUT A SLIGHTLY
HIGHER LEVEL.
AND THE ADMISSIONS TAX, AGAIN,
AS I WAS EXPLAINING, THE ACTUAL
FOR 2021 FOR UNDER 10 MILLION,
THE NOVEMBER FORECAST
ANTICIPATING THE EASING OF
COVID, HAD ALREADY ANTICIPATED
A SIGNIFICANT UPTICK.
WE HAVE ENOUGH EVIDENCE TO
THINK THAT IS BETTER THAN THAT
IF YOU WILL.
NOR EVIDENCE THAT IT IS
THREATENING.
BUT SO FAR, THE SECTOR SEEMS TO
BE BOUNCING BACK WELL.
LONG-RUN FORECAST IS TRICKY
HERE, HARD TO PROJECT WHAT WILL
HAPPEN WITH COVID, BUT
ANTICIPATION OF GROWTH AS WELL.
ANOTHER SALES TAX, THIS IS THE
SALES TAX ASSOCIATED WITH THE
TRANSPORTATION BENEFIT
DISTRICT, SO IT HITS THE SAME
BASIS AS THE GENERAL SALES TAX
UP HERE.
THE INCREASE IS ESSENTIALLY
PROPORTIONAL, SO THE TAX BASE
IS A LITTLE BIT BIGGER THAN WE
ORIGINALLY PROJECTED.
SO IT IS A PROPORTIONAL
INCREASE IN THAT PARTICULAR
REVENUE STREAM, AND ANOTHER
THING TO NOTE, IT IS
SIGNIFICANTLY LARGER THAN IN 21
BECAUSE THE SALES TAX TOOK
EFFECT PARTWAY THROUGH LAST
YEAR AND THIS YEAR WE WILL GET
A FULL YEAR OF THOSE
COLLECTIONS SO SOME OF THE
PATTERN IS NOT ECONOMIC
RECOVERY RELATIVE TO 21 ON THE
GRAPH THERE.
THE TAX BEING IMPOSED FOR THE
FULL YEAR.
THE NET INCREASE FOR THOSE
SOURCES FOR THIS YEAR IS 57
MILLION, BUT OBVIOUSLY IT COMES
IN TWO BIG PIECES, ONE IS
PAYROLL EXPENSE TAX AND THE
OTHER IS REAL ESTATE TAX,
WORTHY OF NOTICE, CAN BE USED
FOR CAPITAL PURPOSES AND SOME
OTHER ONES, HOUSING AT THE
MOMENT.
BUT NOT A FULLY FLEXIBLE SOURCE.
SO AT A HIGH LEVEL, THAT IS OUR
FORECAST.
AND ECONOMIC UPDATE. I'M GOING
TO GET OUT OF POWERPOINT.
BEFORE I DO --
>> YOU MIGHT WANT TO LEAVE IT
UP FOR A SECOND, THANK YOU SO
MUCH.
OKAY, THIS IS RELATIVELY GOOD
NEWS.
I KNOW THAT WE ARE ALL NOT
JUMPING UP AND DOWN YET BECAUSE
WE HAVE A LOT TO DO IN TERMS OF
NUMBER CRUNCHING FOR THE
REMAINDER OF 2022 AND ALSO
2023, BUT THANK YOU FOR SHARING
GOOD NEWS FOR US TODAY AND THE
DIRECTOR OF THE CITY BUDGETS
OFFICE, PLEASE GO AHEAD.
>> THANK YOU, I'M CURIOUS,
DIRECTOR BEN NOBLE, IF YOU
HAVE A WAY OF ESTIMATING THE
DIRECT IMPACT OF INFLATION ON
THESE NUMBERS?
SO IF INFLATION HAD BEEN LOWER,
HOW MUCH LOWER WITH THIS
FORECAST HAVE BEEN?
FOR EXAMPLE.
>> I WILL TAKE A SHOT, IT'S A
LITTLE BIT TRICKY BECAUSE SOME
OF WHAT IS DRIVING SOME
MODERATION OF THE FORECAST IS
THE EXPECTATION OF THE FED
RAISING INTEREST RATES, WHICH
IS IN RESPONSE TO INFLATION.
SO THAT IS ENDOGENOUS IN THAT
SENSE, TO USE A FANCY WORD.
I DON'T KNOW IF YOU HAVE ANY
OTHER THOUGHTS.
>> NOTHING PARTICULARLY, WE CAN
CONVERT IT IN REAL TERMS,
FIGURING OUT WHAT IT WOULD HAVE
BEEN IS A HARD QUESTION.
>> I THINK THE CONCERN I'M
SITTING WITH WHEN I SEE THE GAP
BETWEEN THE BASELINE AND
OPTIMISTIC COMPARED WITH THE
GAP BETWEEN BASELINE AND
PESSIMISTIC, IT'S SUCH A MUCH
BIGGER JUMP DOWN, SO I'M TRYING
TO WRAP MY HEAD AROUND, THE
BASELINE IS NOT FOR EXAMPLE
SPLITTING THE DIFFERENCE
BETWEEN THOSE SCENARIOS.>> THAT
IS GOING BACK TO THE FACT THAT
I WAS JUST FORCING A BIGGER
DOWNSIDE RISK, SO PROBABILITY
DISTRIBUTION IS SKEWED TOWARD
MORE NEGATIVE OUTCOMES, WE ARE
SEEING VERY LITTLE UPSIDE
POTENTIAL AND CONSIDERABLE,
VERY SEVERE AND QUITE LIKELY
DOWNSIDE RISK BECAUSE OF ALL
THE INDICATIONS OF RUSSIA'S
INVASION OF UKRAINE.
>> IN LAYPERSON'S TERMS, IT'S
HARD TO IMAGINE US DOING A LOT
BETTER, IT'S NOT HARD TO IMAGINE
US DOING CONSIDERABLY WORSE.
AND THE TRUTH IS, OVERALL,
AGAIN, HE POINTS OUT THE
RESILIENCY, THE ECONOMY HAS
DONE PARTICULARLY WELL GIVEN
THE SHOCKS WE HAVE SEEN OVER
THE PAST COUPLE YEARS.
THE STIMULUS WAS VERY EFFECTIVE
, BUT THERE'S NOW THIS,
EXISTENTIAL IS THE WRONG WORD,
BUT GLOBAL SCALE DISRUPTION
THAT IS AFFECTING THE BROAD-
BASED ECONOMY, THAT DOESN'T
SEEM TO HAVE ANY RESOLUTION.
>> THAT IS A GOOD POINT.
EXCUSE ME, DIRECTOR, PLEASE GO
AHEAD.
>> I WAS JUST SAYING THANK YOU,
PLEASE CONTINUE.
>> EXCELLENT, I SEE CENTRAL
STAFF, DO YOU HAVE ANY
ADDITIONAL QUESTIONS?
>> THANK YOU, YES, THANK YOU
FOR THE OPPORTUNITY TO ASK THE
QUESTION.
JUST LOOKING AT THESE NUMBERS
AND UNDERSTANDING ALL OF THE
COMPLEXITY THAT GOES INTO IT.
I'M GOING TO ASK A VERY BASIC
QUESTION, AND THAT IS HOW
ACCURATE IS THE CRYSTAL BALL
THAT YOU USE WITH PROJECTING
NUMBERS?
SO WHEN YOU LOOK BACK AFTER
COLLECTING THE DATA, A YEAR AND
A HALF FROM NOW, HOW CLOSE WITH
THESE NUMBERS BE TO THOSE
ACTUAL RESULTS?
>> THAT IS A GREAT QUESTION,
THAT IS ONE AS WE ARE SETTING
OUT TO ANSWER, WE ARE STARTING
TO COLLECT THE DATA THAT ARE
NEEDED TO DO EXACTLY THAT. TO
COMPARE THE FORECAST TO THE
ACTUAL.
I THINK I KNOW, THAT WE TEND TO
BE CONSERVATIVE.
SO THAT TENDS TO BE THE CASE OF
THE REVENUE FORECAST INCREASE
OVER THE COURSE OF THE YEAR, IF
YOU WILL.
AND ACTUALLY RELATIVE TO THAT.
OBVIOUSLY WE DO THE BEST WE CAN
, BUT THAT IS BIAS AT SOME
LEVEL, KNOWING FROM THE
BUDGETARY PERSPECTIVE, BEING ON
ONE SIDE OF THAT VERSUS THE
OTHER.
IT'S EASIER TO SPEND MONEY,
THEN IT IS TO TRY TO DEAL WITH
REALITY OF NOT BRINGING IN WHAT
YOU ANTICIPATED.
WHAT I THINK THAT'S A REALLY
GOOD QUESTION IN TERMS OF
SITTING IN THIS ROLE, I NEED TO
UNDERSTAND IT BETTER.
IT STARTED DOWN THAT PATH,
AFTER OUR LAST MEETING, BUT WE
WILL SPEND MORE TIME ON THIS
FORECAST. IT IS NOW PART OF THE
WORK PROGRAM FOR THIS YEAR, IF
YOU WILL, AND ACTUALLY THE NEXT
WEEK OR SO WE WILL MOVE AWAY
FROM THIS, WE HAVE TO DO SOME
HIRING TO BRING IN ADDITIONAL
ANALYSTS.
THAT WILL GIVE US SOME
ADDITIONAL CAPACITY AND THAT IS
DEFINITELY A QUESTION WE WANT
TO UNDERSTAND BETTER.>>
APPRECIATE THAT.
>> THAT IS A GOOD QUESTION.
>> HOW MANY ADDITIONAL FOLLOW-
UP QUESTIONS?
>> IF I HAVE THE OPPORTUNITY,
AND I WOULD ACTUALLY GO BACK IN
TIME, AND I REGRET NOT HAVING
ASKED THIS QUESTION EARLIER,
BUT ON SLIDE 18, IF WE COULD.
UNDERSTANDING THAT THE DATA
AVAILABILITY FOR GENERAL
EXPENSE TAX IS LIMITED, I'M
TRYING TO UNDERSTAND WHAT IS
THE KEY VARIABLE THAT IS BEING
TOGGLED BETWEEN THE THREE
DIFFERENT SCENARIOS. IF IT'S
JUST THE UNDERLINE EMPLOYMENT
FORECAST, IF IT'S ALTERNATIVE
ASSUMPTION ABOUT RETURN TO
WORK, OR WHAT IS THE NATURE OF,
LIKE WHAT IS THE DRIVING THE
DIFFERENCE BETWEEN THIS
EXPERIENCE?
>> THE MAIN DIFFERENCE BETWEEN
THOSE MAIN DRIVING FACTORS HERE
IS DIFFERENT PROJECTIONS FOR
EMPLOYMENT, SPECIFICALLY FOR
INFORMATION TO IMPLEMENT IN
PROFESSIONAL BUSINESS SERVICES,
IN ADDITION TO THE FORECAST FOR
WAGES AND SALARIES, FOR THE
ECONOMY AS A WHOLE.
>> OKAY, THANK YOU.
>> WE DON'T HAVE A SIMPLE
QUANTITATIVE WAY TO DEVELOP
RETURN TO WORK SCENARIOS, SO
THAT IS LESS THE THING, BUT
WHAT WE DO KNOW ARE THE
PROJECTIONS FOR THE KEY SECTORS
THAT ARE RESPONSIBLE FOR PAYING
THE TAX.
>> THAT'S WHAT I ASSUMED BUT I
DIDN'T WANT TO RELY ON MY
ASSUMPTIONS.
>> THAT IS WHY WE ARE HERE, SO
THAT IS ALL GOOD.
THAT'S A GOOD QUESTION.
I'M HAPPY TO HIGHLIGHT HOW HARD
IT IS, I SHOULD ALSO ADD, WE
ARE IN BUREAUCRATIC DIALOGUE
WITH THE CITIES OFFICE, WITH
THIS PARTICULAR OFFICE, TO GET
ACCESS TO EVERMORE OF THEIR
DATA, THERE'S A PROTOCOL ABOUT
THAT AND WE ARE WORKING THROUGH
IT AS WE SPEAK.
BUT SECURITY IS PARTICULARLY
IMPORTANT IN THAT SPACE, THE
INFORMATION IS PROPRIETARY, SO
THEY NEED TO KNOW THAT WE CAN
HANDLE THAT.
SO WORKING ON THAT AS WELL.
>> WE WISH YOU ALL OF THE LUCK
WITH THAT DIALOGUE, I'M SURE
PEOPLE ARE JUMPING TO BE A PART
OF THAT BUT DO LET US KNOW IF
WE CAN HELP OUT IN ANY WAY, I
WANT TO MAKE SURE YOU HAVE
ACCESS TO ALL THE IMPORTANT
INFORMATION THAT YOU MIGHT
NEED, AND TOM'S QUESTION IS A
GOOD ONE, IT FOLDS IN EARLIER
WITH THE QUESTION I WAS
RAISING, HOW DID THE DIFFERENT
SECTORS NOT JUST HAVE
PROJECTIONS BASED ON
ASSUMPTIONS ABOUT HOW MANY
PEOPLE ARE GOING TO BE EMPLOYED
OR THE ASSUMPTIONS ABOUT THE
WAGES THEY MIGHT BE REEMPLOYED
AT, IF SOME OF THE DATA WE ARE
GETTING IN REAL-TIME IS SHOWING
A DIFFERENT INDICATION THAT
MIGHT HELP US WITH BEING ABLE
TO PROVIDE A MORE ACCURATE
FORECAST IN THE FUTURE IF
THERE'S CHANGES IN CERTAIN
INDUSTRIES OR SECTORS.
CAN WE POP IN THAT LAST SLIDE
AGAIN, SLIDE NUMBER 24?
EXCUSE ME, SORRY.
I DID WANT TO SAY THAT WE ARE
STARTING TO SLIDE INTO AGENDA
ITEM NUMBER THREE WHICH IS
REALLY GETTING TO THE
DISCUSSION AND DELIBERATION
PORTION OF THE AGENDA FOR TODAY.
AGAIN, THE FORECAST COUNCIL
DISCUSSION AND POSSIBLE VOTE
REGARDING THE ADOPTION OF THE
APRIL FORECAST, THE LAST ITEM
ON THE AGENDA, WE HAVE SMOOTHLY
TRANSITIONED INTO THAT BUT I
WANTED TO CONTINUE TO WELCOME
ADDITIONAL COMMENTS OR
QUESTIONS ON THIS.
THE ONE ADDITIONAL COMMENT FOR
THE MEMBERS OF THE VIEWING
PUBLIC, IF YOU LOOK AT THE TAKE
AWAY FOR THESE SLIDES, THE
CURSOR POINTED TO THE
DIFFERENCE BETWEEN APRIL
PROJECTED FORECAST AND THE
NOVEMBER FORECAST AT THE TIME,
THAT IS AN INDICATION THAT FOR
THE GENERAL FUND, WE ARE
ANTICIPATING ABOUT -- I SEE
YOUR EMAILS POPPING UP THERE.
>> SORRY ABOUT THAT.
>> SO, $32.5 MILLION OVER THE
PROJECTED AMOUNT IN THE
NOVEMBER FORECAST, GOOD NEWS
FOR GENERAL FUND, AND JUST
BELOW THAT, $57.3 MILLION OVER
THE PROJECTED FORECAST FROM THE
NOVEMBER FORECAST IS THE TAKE
AWAY FROM THIS APRIL FORECAST
FOR THE NON-GENERAL FUND.
AND I THINK IT'S IMPORTANT TO
CITE THESE NUMBERS BECAUSE I
BELIEVE THAT IS THE TAKE AWAY
FROM THE BASELINE PROJECTED
FORECAST THAT IS BEING
SUGGESTED HERE.
I ALSO WANT TO NOTE THE NON-
GENERAL FUND REVENUES ARE FOR
SPECIFIC PROGRAMMING.
THOSE ARE ACCOUNTED FOR
DOLLARS, SO I DON'T WANT
ANYBODY TO TAKE AWAY THAT IT'S
A COMBINATION OF THESE TWO
NUMBERS FOR GENERAL FUND IN
GENERAL.
IT IS GOOD NEWS OVERALL BUT
THERE ARE SPECIFIC REVENUE
STREAMS FOR SPECIFIC PROGRAMS
AND OPERATIONS IDENTIFIED IN
THAT LAST BUCKET.
IS THAT FAIR TO SAY?
>> THAT IS EXACTLY WHY, THAT IS
WHY I SEGREGATED THE TABLES SO
YOU CAN SEE WHAT IS THE GENERAL
FUND, 32.5 IS A FLEXIBLE
RESOURCE THAT CAN BE USED FOR
ANY CITY PURPOSE.
THE REVENUE IN THE LOWER HALF
OF THE TABLE, HERE THE PAYROLL
TAX IS CONSTRAINED BY CITY
ORDINANCES, REAL ESTATE TAX IS
CONSTRAINED BY STATE LAW,
DIVISION TAX IS CONSTRAINED BY
CITY CODE, AND THE
TRANSPORTATION BENEFIT DISTRICT
SALES TAX IS VOTER APPROVED,
THAT IS DEDICATED TO
TRANSPORTATION PURPOSES.
THOSE LOWER HALF, THOSE ARE
ADDITIONAL RESOURCES BUT CAN
ONLY BE USED FOR THOSE
CONSTRAINTS PURPOSES.
>> AGAIN, THE IMPACT OF THOSE
REVENUE STREAMS ARE ALSO GOING
TO THE HEALTH, WELL-BEING AND
ECONOMIC RESILIENCE OF SEATTLE
AS WELL.
BUT IN TERMS OF OUR REVENUE FOR
GENERAL FUND, JUST WANTED TO
MAKE SURE TO CALL THAT OUT
BECAUSE I THINK THAT WILL
CONTINUE TO LIFT UP THESE
NUMBERS AS GOOD NEWS AND ALSO
CONTINUE IN FUTURE
CONVERSATIONS TO TALK ABOUT HOW
WE ADDRESS THE ONGOING NEEDS
PRESENTED TO OUR RESIDENTS IN
THE WAKE OF COVID AND ECONOMIC
HARDSHIP THAT IT WORSENED.
ONE ADDITIONAL THING, RELATED
TO THE BUSINESS LICENSING FEES,
I KNOW THAT WHEN WE HAD A
CONVERSATION IN THE LAND USE
COMMITTEE FOR EXAMPLE, WE WERE
ASKING THE QUESTION ABOUT HOW
WE COULD WORK AS A CITY FAMILY
AGAIN TO EXPEDITE BUSINESS
APPLICATIONS, ESPECIALLY FOR
NEW BUSINESSES THAT ARE TRYING
TO OPEN OR EXPAND IN THE WAKE
OF COVID AND THAT MIGHT BE AN
AREA FOR US TO CONTINUE TO
THINK ABOUT HOW POLICY CHANGES
COULD HELP EXPEDITE ADDITIONAL
úOPENING OF NEW BUSINESSES AS
WELL IF WE ARE SEEING A SLIGHT
DECREASE.
THE MINIMAL IMPACT ON THE
OVERALL PICTURE, BUT I THINK
THAT'S AN IMPORTANT POLICY
QUESTION FOR US TO ASK LATER.>>
YES, THE TAX ADMINISTRATION
GROUP DOESN'T ADMINISTER THE
BUSINESS LICENSES, SO WE WOULD
BE HAPPY TO HAVE A CONVERSATION
WITH YOU, HEARING ABOUT OUR
PROCESSES AND WHAT WE ARE
SEEING IN TERMS OF VOLUME.
>> WE MAY BE INTERESTED IN
TAKING YOU UP ON THAT
CONVERSATION.
OKAY.
ANY ADDITIONAL TAKEAWAYS HERE?
SENIOR DEPUTY MAYOR, ANYTHING
ELSE?
OKAY.
>> IT'S ALL GOOD, WELL, THE
BASELINE IS.
SO I'M GOING TO END WITH
OPTIMISM TODAY.
>> AND I THINK WITH THAT, I'M
NOT SEEING ANY ADDITIONAL
HANDS, JUST A REMINDER IN TERMS
OF APPROVING THE RECOMMENDED
FORECAST, AS LONG AS WE CONCUR
WITH THE RECOMMENDATION FROM THE
OFFICE OF ECONOMIC REVENUE
FORECAST, THERE IS NO NEED FOR
A FORMAL VOTE OF THE BODY OF
THE REVENUE FORECAST COUNCIL.
THE LEGISLATION THAT CREATED
THE FORECAST COUNCIL AND THE
FORECAST OFFICE PURPOSELY GAVE
SIGNIFICANT DIFFERENCE TO THE
RECOMMENDATIONS OF THE FORECAST
OFICE.
THE GOAL WAS TO PROVIDE A
PROFESSIONAL AND OBJECTIVE
FORECAST THAT WAS FREE FROM ANY
POLITICAL INFLUENCE AND WHILE
WE DO HAVE THE COLLECTIVE
AUTHORITY TO OVERRULE AND
RECOMMEND USE OF A DIFFERENT
ASSUMPTION, IF WE THINK IT'S
APPROPRIATE, THOSE VOTES DO
REQUIRE THREE-MEMBER VOTE FOR
ANY ALTERNATIVE SCENARIO.
TODAY WE HAVE BEEN PRESENTED
WITH THE BASELINE FORECAST
SCENARIO AND AS THE SENIOR
DEPUTY MAYOR NOTED AND I CONCUR
WITH, I'M OPTIMISTIC ABOUT THIS
BASELINE FORECAST.
I'M NOT HEARING ANY OBJECTIVES
SO FAR.
I WOULD AGAIN ASK FOLKS, IF YOU
HAVE ANY OBJECTIONS TO PLEASE
GO AHEAD AND FEEL FREE TO SPEAK
ABOUT THAT.
WE WOULD BE HAPPY TO HAVE A
DISCUSSION ABOUT IT.
BUT IF I DON'T HEAR ANY
ADDITIONAL DISCUSSION OR
CONCERNS AND A LOT OF THUMBS UP
ON THE SCREEN HERE, I'M GOING
TO REQUEST THAT THE MEETING
MINUTES REFLECT THAT THE
COUNCIL HERE, THE REVENUE
COUNSEL IS GOING TO CONCUR WITH
THE RECOMMENDED BASELINE
FORECAST FOR THIS MEETING APRIL
8, 2022 AND ACCEPT THE BASELINE
FORECAST AS PRESENTED BY THE
ECONOMIC REVENUE FORECAST
OFFICE.
THIS IS THE FORMAL STEP THAT
HAS BEEN CALLED FOR AND WE WILL
MAKE SURE IT IS RECORDED IN THE
NOTES AS APPROPRIATE.
DIRECTOR NOBLE, THANK YOU.
AND FOR THE COLLABORATION
BETWEEN THE DEPARTMENTS, I KNOW
YOU WORKED AS MUCH ON THAT.
AND WE WILL HEAR FROM OTHERS
FROM THE ECONOMIC REVENUE
FORECAST AT OUR APRIL 20
SEATTLE CITY COUNCIL FINANCE
AND HOUSING COMMITTEE MEETING,
WE WILL ALSO WELCOME THE
DIRECTOR FROM THE CITY'S BUDGET
OFFICE FOR THE FULL REVENUE
FORECAST AND TO HELP US THREAD
TOGETHER ALL OF THE
INFORMATION.
BUT FOR TODAY, WE VERY MUCH
APPRECIATE THIS PRESENTATION,
AND AS YOU HEARD, IT HAS BEEN
WIDELY ACCEPTED.
ANY ADDITIONAL COMMENTS ABOUT
NEXT STEPS?
>> NOTHING SPECIFIC, AS YOU
IDENTIFIED, I WILL MAKE SURE
THE MEETING MINUTES REFLECT THE
CONCURRENCE OF THE COUNCIL. WE
WILL SEE YOU AGAIN IN AUGUST
AND IN BETWEEN WORKING OUT A
NUMBER OF THINGS INCLUDING AN
ASSESSMENT ON FORECAST
RELIABILITY IF YOU WILL.
SO WE WILL BRING YOU BACK SOME
INFORMATION ON THAT.
I LOOK FORWARD TO THAT AS WELL.
>> EXCELLENT, AS A REMINDER TO
FOLKS, AUGUST 8 AT 10:30 A.M.,
WE WILL HAVE A REVISED ECONOMIC
AND REVENUE FORECAST, THIS WILL
BE A CHANCE FOR US TO ADJUST
THE FORECAST PRESENTED FOR
TODAY.
THIS WILL BE THE BASIS FOR THE
PROPOSED 2023-2024 BUDGET.
THANK YOU VERY MUCH FOR ALL THE
WORK THAT IS GOING INTO THIS,
AND IN NOVEMBER, NOVEMBER 2 AT
12:30, WHEN THE COUNCIL WILL BE
IN THE MIDST OF ITS
DELIBERATIONS OF THE BUDGET, WE
WILL HEAR AN UPDATED ECONOMIC
AND REVENUE FORECAST ANALYSIS,
THAT WILL INFORM THE FINAL
DECISIONS FOR SEATTLE CITY
COUNCIL AND THAT IS OUR FINAL
BUDGET FOR THE CITY FAMILY ONCE
WE GET THE INFORMATION THERE.
THE BRIEFINGS THAT WE WILL
RECEIVE OVER THE NEXT FEW
MONTHS WILL ALSO INCLUDE AN
OPPORTUNITY FOR US, EVERY TIME
WE HEAR FROM THE ECONOMIC
REVENUE FORECAST COUNCIL MEETING
IN AUGUST AND AGAIN IN
NOVEMBER, WE WILL THEN HAVE A
SUBSEQUENT MEETING FROM THE
FINANCE AND HOUSING COMMITTEE
MEETING THAT WILL PROVIDE AN
OVERVIEW OF THE NONECONOMIC
OVERVIEW, AND ANY OTHER
REVENUES TIED TO THE CITY LINES
OF BUSINESS.
THAT WILL HELP US ELIMINATE AS
WELL.
AT THIS POINT, I THINK WE HAVE
REACHED THE END OF THE AGENDA
AND I WANT TO MAKE SURE I
DIDN'T LEAVE ANYTHING OFF.
ANYTHING ELSE FOR THE GOOD OF
THE ORDER?
OKAY.
THEN THANK YOU AGAIN FOR THE
PRESENTATION TODAY AND ALL OF
THE WORK THAT YOU ARE DOING.
WE WILL SEE YOU ON APRIL 20,
FOR A FOLLOW-UP FOR THIS
DISCUSSION AND A QUICK PREVIEW
ON MAY 4, CENTRAL STAFF WILL BE
GOING OVER THE FISCAL HEALTH OF
THE CITY AND HELPING US LOOK AT
A SIX-YEAR PROJECTION AS WELL.
IF THERE'S NO OTHER QUESTIONS,
THANK YOU ALL FOR ALL YOU DO,
STAY SAFE AND HEALTHY AND WE
WILL SEE YOU AGAIN THE NEXT
TIME AROUND.
THANKS FOR ALL YOUR GREAT WORK
ON THIS.
THE MEETING IS ADJOURNED.