>>> GOOD MORNING, EVERYONE.
THANK YOU SO MUCH FOR JOINING
US TODAY. THIS IS WEDNESDAY,
NOVEMBER 2, 2022. YOUR JOINING
THE MEETING OF THE CITY OF
SEATTLE REVENUE FORECAST
MEETING. THE FORECAST MEETING
WILL COME TO ORDER. I AM HERE
TODAY WITH MY FORECAST COUNCIL
COLLEAGUES, DIRECTOR OF THE
SEATTLE CITY BUDGET OFFICE AND
FROM THE MAYOR'S OFFICE,
REPRESENTING MAYOR MONISHA
HARRELL, THANK YOU VERY MUCH .
WE ALSO HAVE THE ACTING FINANCE
DIRECTOR, JAMIE CARNELL, THANK
YOU FOR BEING WITH US. WELCOME
TO THIS FORUM . CONGRATULATIONS
WHEN YOU'RE IN TERM
APPOINTMENT. WE ARE EXCITED TO
HAVE WITH US BRYNDEL SWIFT,
CHIEF OF STAFF, REPRESENTING
COUNCIL PRESIDENT DEBORA JUAREZ
. THANK YOU FOR BEING HERE WITH
US. THIS REPRESENTS AN EQUAL
BALANCE OF THE LEGISLATIVE AND
EXECUTIVE BRANCH AS WE SEEK TO
HAVE THESE FORECAST MEETINGS ON
A QUARTERLY BASIS TO BRING TO
MEMBERS OF THE PUBLIC THE
LATEST INFORMATION REGARDING
THE REVENUE FORECAST FOR THE
CITY OF SEATTLE. I WANT TO
THANK THE TEAM WHO MAKES THESE
FORECASTS POSSIBLE. WE'RE
JOINED HERE TODAY BY STAFF FROM
THE OFFICE OF ECONOMIC AND
REVENUE FORECAST DEPARTMENT,
INCLUDING THE DIRECTOR,
DIRECTOR BEN NOBLE, WHO WILL BE
JOINING, ALONG WITH MEMBERS OF
THE BUDGET OFFICE, THE COUNCIL
CENTRAL STAFF AND OTHER
INDIVIDUAL OFFICES, AS WELL,
FOR THE PRESENTATION TODAY. THE
MAIN PURPOSE OF TODAY'S
PRESENTATION IS FOR THE REVENUE
FORECAST COUNCIL TO RECEIVE
THE UPDATE FROM THE REVENUE
PROJECTIONS AS CREATED AND
ANALYZED BY THE OFFICE OF
ECONOMIC REVENUE FORECAST. THE
FORECAST OFFICE PROVIDES FOR US
A LIST OF THEIR INTERPRETATION
AND ANALYSIS OF THE REVENUE
STREAMS AND THIS IS AN
OPPORTUNITY FOR THE FORECAST
COUNCIL HERE TO REVIEW THE
RECOMMENDATIONS FROM THE
FORECAST OFFICE. THIS WILL BE
THE LAST UPDATE THAT WE
RECEIVED BEFORE THE SEATTLE
CITY COUNCIL TAKES FINAL ACTION
ON THE 2023-2024 BUDGET. THAT
WILL CONCLUDE IN NOVEMBER OF
THIS YEAR. THIS FORECAST IS
INTENDED TO GIVE US
LATEBREAKING INFORMATION AND
THE LATEST INFORMATION
AVAILABLE SO WE CAN FINALIZE
OUR BUDGETARY DECISIONS IN THE
MONTH OF NOVEMBER, AS REQUIRED
BY STATUTE. THIS FORECAST WILL
IDENTIFY THE FINANCIAL
RESOURCES AVAILABLE FOR THE
COUNCIL TO APPROPRIATE
THROUGHOUT ITS FINAL BUDGET
DELIBERATIONS AS MUCH. COUNCIL
WILL RENEW THOSE DELIBERATIONS
THROUGHOUT THE COURSE OF THE
UPCOMING WEEK AND I WILL HAVE %
MORE INFORMATION FOR THE
COUNCIL AND MEMBERS OF THE
PUBLIC AS WE CONSIDER THE
INFORMATION SHARED WITH US
TODAY. AS A REMINDER, THE
INFORMATION IS SHARED AT THE
SAME TIME WITH MEMBERS OF THE
PUBLIC, THE EXECUTIVE AND THE
LEGISLATIVE BRANCH AS WE SEEK
TO USE THIS FORECAST COUNCIL
IS A WAY TO SHARE INFORMATION
IN REAL-TIME. COPIES OF THE
MATERIAL WERE POSTED THIS
MORNING JUST AFTER 10:00 AM AS
WE HEADED INTO THIS MORNING FOR
MEETING. A COPY OF THE AGENDA
HAS ALSO BEEN CIRCULATED TO
MEMBERS AND IS AVAILABLE
ONLINE, ALONG WITH ALL THE
PRESENTATION MATERIALS ON THE
FORECAST COUNCIL'S WEBSITE.
COLLEAGUES, AS YOU LOOK AT THE
AGENDA TODAY, PLEASE LET ME
KNOW IF YOU SEE ANY CONCERNS
BECAUSE I WILL MOVE FOR
ADOPTION OF THE AGENDA. I MOVED
TO ADOPT THE AGENDA. IS THERE A
SECOND?
>> SECOND.
>> THANK YOU. IT HAS BEEN MOVED
AND SECONDED. BEFORE I
CONFIRMED TODAY FOR AGENDA, I
WANT TO KNOW TO REORDERING UP
TODAY FOR AGENDA. I WILL BE
SEEKING TO HAVE THE TOPIC THAT
IS LISTED AS ITEM NUMBER TWO,
THE ANALYSIS OF THE ACCURACY
OF THE FORECAST COUNCIL, I WILL
MOVE THAT TO THE END OF TODAY
FOR AGENDA BEFORE WE ADJOURN.
WE WILL KEEP ALL OF THE ITEMS
ON THE AGENDA THAT ARE THERE,
JUST REORDERING ITEM NUMBER
TWO. ANY DISCUSSION ABOUT THAT?
OKAY. THERE IS NO OBJECTION TO
TODAY FOR REVISED AGENDA,
TODAY FOR REVISED AGENDA WILL
BE A DOCTOR. HEARING NO
OBJECTION, TODAY FOR AGENDA IS
ADOPTED. WE WILL MOVE INTO
ACCEPTING THE MINUTES. COPY OF
THE MINUTES FROM THE AUGUST 8
MEETING, AGAIN, WE HAD
QUARTERLY MEETINGS, LAST ONE
WAS 8 AUGUST AND THE MINUTES
HAVE BEEN CIRCULATED TO THE
FORECAST COUNCIL MEMBERS AND
THEY HAVE HAD A CHANCE TO
REVIEW THOSE. THEY ARE ALSO
POSTED ONLINE FOR MEMBERS OF
THE PUBLIC. I MOVED TO SEEK
APPROVAL OF AMENDMENTS. I MOVED
TO ADOPT APPROVAL OF THE
MINUTES, AS POSTED FROM THE
AUGUST 8 MEETING. IS THERE A
SECOND?
>> SECOND.
>> IT HAS BEEN MOVED AND
SECONDED TO APPROVE THE MEETING
MINUTES FROM OUR LAST MEETING .
IS THERE ANY COMMENTS OR
CONCERNS? HEARING NONE, THE
MEETING MINUTES WILL BE
ADOPTED. HEARING NO ADOPTION
PLANS OBJECTION, THE MEETING
MINUTES ARE ADOPTED. OKAY, WE
WILL MOVE RIGHT ALONG. THANK
YOU ALL AGAIN FOR YOUR
CONVERSATIONS TODAY, YOUR
QUESTIONS, YOUR PRESENCE IN
THIS MEETING. THIS IS A
CRITICAL CONVERSATION FOR US TO
HAVE, AS WE ARE IN THE MIDST OF
FINALIZING THE 2023-2024
BUDGET. WE WILL MOVE DIRECTLY
TO ITEM NUMBER THREE. WE WILL
COME BACK TO ITEM NUMBER TWO
BEFORE WE ADJOURN TODAY. I WILL
READ ITEM NUMBER THREE INTO THE
RECORD. ITEM NUMBER THREE IS
PRESENTATION OF THE NOVEMBER
2022 ECONOMIC REVENUE FORECAST.
RECOMMENDATION FROM THE OFFICE
OF ECONOMIC AND REVENUE
FORECAST REGARDING THE REVENUE
FORECAST FOR THE REMAINDER OF
2022, UPCOMING CALENDAR YEAR
2023 AND THE UPCOMING CALENDAR
YEAR AFTER THAT, 2024. ON THIS
ITEM, WE ARE PLEASED TO BE
JOINED WITH THE OFFICE OF
ECONOMIC OF REVENUE FORECAST
LEADERSHIP, THANKS AGAIN TO
DIRECTOR NOBLE FOR BEING HERE.
HE WILL WALK US THROUGH THE
PROJECTIONS AND WE WILL INCLUDE
ITEMS NUMBER THREE IN FOUR
TOGETHER. WE DID THE
PRESENTATION OF THE REVENUE
FORECAST AND WE HAD THE
OPPORTUNITY FOR DELIVERY AND
ACCEPT OR REJECT IT AS ADOPTED
BY THE ECONOMIC AND REVENUE
FORECAST. AS ITEM NUMBER THREE
SUGGEST, IT WILL PROVIDE AN
UPDATE ON THE ECONOMIC AND
REVENUE FORECAST FROM VARIOUS
REVENUE STREAMS UNDER THE
PURVIEW OF OFFICE OF ECONOMIC
AND REVENUE FORECAST. THIS IS
OF PARTICULAR IMPORTANCE, AS WE
CONTINUE TO DELIBERATE THE
23-24 BIANNUAL BUDGET. AND THE
REVENUE FORECAST IS AN
ESSENTIAL COMPONENT OF THOSE
PROCESSES. THANK YOU AGAIN TO
THE TEAM AT THE OFFICE OF
ECONOMIC REVENUE FORECAST FOR
THE WORK THAT I WANT TO TAKE
THIS AS AN OPPORTUNITY TO THANK
THE CITY BUDGET OFFICE, THE
ENTIRE TEAM WORKING WITH THE
SEATTLE CITY COUNCIL AS WE
CONSIDER THE PROPOSED BUDGET
THE MAYOR TRANSMITTED AT THE
END OF SEPTEMBER. TODAY FOR
FORECAST WILL PRESENT A REVISED
FORECAST FOR THIS YEAR, 2022
AND AGAIN FOR THE UPCOMING
BIANNUAL. COUNCIL STILL HAS THE
OPPORTUNITY TO ADOPT POLICY
DRIVEN CHANGES AND CITY
REVENUES AS PART OF ITS ONGOING
BUDGET DELIBERATIONS. THESE
FORECASTS WILL SET THE BASELINE
FOR REVENUES UNDER THE CURRENT
AND AVAILABLE EXISTING CITY
LAW RELATED TO REVENUE STREAMS
THAT ARE AVAILABLE FOR
APPROPRIATION IN 2023 AND 2024.
SO IT DOES NOT CONSIDER ANY
REVENUE STREAMS THAT MIGHT BE
POSSIBLE UNDER EXISTING
COUNCIL SUGGESTIONS FOR
INCLUSION IN THE 2023-2024
BIANNUAL AND. I KNOW THAT IS
CLEAR TO FOLKS BUT I WANT TO
MAKE SURE THIS IS ONLY LOOKING
AT EXISTING STATUE AND EXISTING
REVENUE STREAMS. WITH THAT, I
WILL TURN IT OVER TO THE
FORECAST OFFICE. THANK YOU,
DIRECTOR NOBLE , DR. DIRECTOR
BEN NOBLE WILL PROVIDE A
SUMMARY ABOUT THE ECONOMIC
CONDITIONS AND THE PROJECTED
CITY REVENUES . IN WATER TO
ENSURE WE HAVE A FULL PICTURE
OF ALL OF THE RELEVANT CITY
REVENUE STREAMS, WE ARE GOING
TO MAKE SURE THAT YOU ALL GET
THE CHANCE TO ASK YOUR
QUESTIONS THROUGHOUT THE
PRESENTATION. PLEASE JUST GO
AHEAD AND RAISE YOUR VIRTUAL
HAND AND I WILL LOOK FOR THOSE.
I DO NOTE YOUR QUESTIONS MAY
BE ANSWERED THROUGHOUT THE
COURSE OF THE PRESENTATION BUT
IF YOU WOULD LIKE TO GO AHEAD
AND ASK A QUESTION IN THE
MEANTIME, OF COURSE,
COLLEAGUES, YOU'RE WELCOME TO
DO SO. I WILL TURN IT OVER TO
DIRECTOR NOBLE TO GET US
STARTED ON ITEM NUMBER THREE.
>> THANK YOU VERY MUCH ,
COUNCILMEMBER MOSQUEDA. I AM
JOINED BY DIRECTOR JAN DURAS
AND TRAN 22 ON THIS. I WILL
PUT ON THE POWERPOINT AND BEGIN
THE PRESENTATION. HERE WE GO.
SO, THE FORMAT TODAY IS TO
START GETTING A FLAVOR FOR THE
ECONOMIC DEVELOPMENT THAT IS
HAPPENED SINCE OUR LAST MEETING
AND TO SHIFT TO TALK ABOUT
ACTUAL FORECASTS, BOTH THE
NATIONAL FORECAST THAT ARE
INPUT TO OUR REGIONAL FORECAST
AND THE REGIONAL FORECAST
THEMSELVES, REALLY FOCUSING THE
SECOND PART ON THE ECONOMY.
AND THEN, THE THIRD PART, WE
WILL SHIP TO TALK ABOUT REVENUE
STREAMS. FIRST, WE WILL TALK
WITH THE GENERAL FUND AND ITS
KEY COMPONENTS, THE CHANGES WE
ARE SEEING THERE, THEN WE WILL
SHIFT TO SOME OF THE OTHER
MAJOR REVENUE STREAMS THAT ARE
IN THE GENERAL FUND AND
SUPPORT GENERAL GOVERNMENT
ACTIVITIES. WITH THAT, WE WILL
JUST DIVE IN. STARTING WITH
ECONOMIC UPDATE, A LOT HAS
HAPPENED SINCE WE LAST SPOKE TO
YOU IN AUGUST IN PARTICULAR,
ECONOMIC CONDITIONS CONTINUE TO
DETERIORATE . EXPECTATIONS
ABOUT FUTURE CONDITIONS HAVE
ALSO DETERIORATED. THE BIGGEST
CONCERN IN TERMS OF ECONOMICS,
IS INFLATION. THE ORIGINAL
HOPE EARLY IN THE YEAR HAD
BEEN THAT PRICES WOULD BE
TRANSITORY , PRICES WOULD FALL
QUICKLY. THAT HAS NOT HAPPENED.
THE PRICE INCREASES STARTED IN
THE AREAS OF FOOD AND ENERGY
AND HAVE NOW BECOME MUCH MORE
BROAD-BASED THROUGHOUT THE
ECONOMY. CORE INFLATION IS AN
ECONOMIC CONCEPT THAT IS PRICES
ESSENTIALLY SEPARATING AND
RISING WITH ENERGY AND EVEN
WITH THOSE KIND OF CORE PRICING
INCREASING, THE RATE OF
INCREASE IS AT A 40 YEAR HIGH.
THE FED RESPONSE, YOU WILL
HEAR A LOT ABOUT THAT TODAY
BECAUSE IT IS BECOMING A KEY
DRIVER, WE MENTIONED THIS AT
THE PREVIOUS MEETING, BUT IT
HAS NOW BECOME A KEY DRIVER IN
THE FORECAST. THE FED HAS
COMMITTED ITSELF, IF YOU WILL,
COME HELL OR HIGH WATER, TO
BRING INFLATION DOWN AND IT IS
INTENDING TO RAISE INTEREST
RATES TO MAKE THAT HAPPEN. WE
WILL TALK MORE ABOUT THAT AND
THEIR STRATEGY ON THAT. AS OF
MOMENTS AGO, SINCE THE TIME I
FINALIZE THIS AT 10:15 AND
SPEAKING TO YOU NOW, THE FED
HAS, IN FACT, APPROVED A .75
INCREASE IN THE FED RATE. THEY
HAVE GONE UP, THEY INCREASED IT
BY 3 PERCENTERS UP TO THIS
POINT AND NOW AN ADDITIONAL
.75. WE ARE EXPECTING AT THE
FORECAST, WE ANTICIPATE AN
ADDITIONAL .5% INCREASE IN
DECEMBER AGAIN AT THEIR NEXT
MEETING. THE FED IS SETTING
THE RATE AT WHICH IT LENDS
MONEY TO BANKS BUT IT HAS THE
EFFECT OF RAISING INTEREST
RATES ACROSS THE ECONOMY. FOR
INSTANCE, MORTGAGE RATES ARE
NOW AT 10 PLUS YEAR HIGHS. WE
ARE MOVING PAST 7%. THE THINGS
THAT HAVE HAPPENED SINCE
AUGUST, THE WAR IN UKRAINE HAS
BEEN ESCALATED FURTHER. THAT
HAS CREATED CONSIDERABLE
POLITICAL AND ECONOMIC
úUNCERTAINTY ACROSS EUROPE. I
HAPPENED TO BE TROUBLING IN
ENGLAND IN LATE AUGUST AND
THERE WAS A FALLIBLE CONCERN
ABOUT THE COST OF HEATING HOMES
IN THE UPCOMING WINTER. THAT IS
OF MAJOR CONCERN BOTH IN
ECONOMICS AND POLITICS. IT IS A
VERY REAL THING THERE. WE ARE
ALSO SEEING TANGIBLE EFFECTS,
NOW IN THE U.S. ECONOMY,
HOUSING STARTS, HOUSING
PURCHASES, THEY HAVE DROPPED
SIGNIFICANTLY IN SEPTEMBER. WE
SAW HIRING SLOW IN SEPTEMBER WE
HAVE SEEN SOME EVIDENCE AROUND
THE GLOBAL MARKET, AS WELL AND
THE LOCAL MARKET, AS WELL.
DECLINING STOCK VALUES AND HOME
FALLING HOME PRICES AND BALANCE
SHEETS ARE LIKELY ANTICIPATING
HAT WILL AFFECT OUR
WILLINGNESS TO SPEND GOING
FORWARD. SO, AS I INDICATED,
THERE HAVE BEEN SIGNIFICANT
SHIFTS AND EXPECTATIONS ABOUT
THE FED RESERVE BANK STRATEGY.
I WILL SHOW YOU THAT . YOU CAN
ILLUSTRATE THE CHANGE OVER
TIME. THIS FIRST LINE IS GOING
ON THE GRAPH IS THE
EXPECTATIONS WE HAD, THE
FORECAST FROM OUR APRIL
FORECAST. THIS IS THE NATIONAL
FORECAST , THIS WAS THEIR
EXPECTATION BACK IN MARCH. IT
WAS, INTEREST RATES, THEY WOULD
GO UP SLOWLY BACK TOWARDS THE
FED'S LONG-TERM GOAL OF ABOUT
2%. THEY HAD LOWERED THEM
SUBSTANTIALLY DURING THE EARLY
PART OF THE PANDEMIC AS A FORM
OF STIMULUS. YOU CAN SEE RATES
DROPPED TO BASICALLY 0% FOR
MUCH OF 2020 AND 2021. AGAIN,
THE EXPECTATION WAS FOR A
SMOOTH AND SLOW INCREASE. WHEN
WE LAST SPOKE TO YOU IN JULY,
THE EXPECTATION HAD CHANGED
SIGNIFICANTLY. RATES WERE
ALREADY ON THE RISE. THE
EXPECTATION WAS THAT THEY WOULD
BE MAINTAINED AT RELATIVELY
HIGH LEVELS INTO 2024 AND COME
DOWN THROUGH 2024 BACK TOWARDS,
AGAIN, THAT TARGET RATE OF 2%.
THE MOST RECENT FORECAST SHOWS
UP A SUBSTANTIAL CHANGE FROM
THAT, AS WELL. NOW, EXPECTATION
IS THAT WE NEED TO GO EVEN
HIGHER RIGHT NOW TO CURB
INFLATION. AS HIGH AS 4 1/2%
PLUS. THAT RATE WILL STAY AT AN
ELEVATED LEVEL THROUGH MUCH OF
2025. FOR AN EXTENDED PERIOD.
THOSE CHANGES WILL THEN BE
REFLECTED IN THE FORECAST. THEY
COULD HAVE SIGNIFICANT IMPACTS.
I MOVED PAST A SLIDE . BACK.
SORRY. AGAIN, THE GENERAL
EXPECTATION IS THAT RATES WILL
BE MAINTAINED THROUGH 2024 AND
BEGIN TO COME DOWN IN 2025. THE
BASIC STRATEGY HERE, I KNOW
YOU READ ABOUT THIS IN THE
PAPER, BUT PERHAPS NOT, IN
RAISING INTEREST RATES, WITH
THE FED IS HOPING TO DO IS TO
COOL INTO HER SENSITIVE
COMPONENTS OF THE ECONOMY, THE
MOST OBVIOUS EXAMPLES ARE
HOUSING PURCHASES AND AS A
RESULT, HOUSING CONSTRUCTION.
CAPITOL INVESTMENTS, FROM
INVESTING IN FACTORIES AND THE
LIKE, THE HOPE HAD BEEN THE
BIG INCREASES WE SAW EARLIER IN
THE YEAR , THEY WERE
ILLUSTRATED IN THE GRAPH HERE,
THOSE WOULD BE ENOUGH TO BRING
DOWN INFLATION AND WE COULD
MANAGE WHAT IS CALLED A SOFT
LANDING. WE WOULDN'T COOL THE
ECONOMY WITHOUT SENDING US INTO
RECESSION AND WITHOUT
AFFECTING EMPLOYMENT. AS
RECESSION HAS INCREASED, THAT
IS NO LONGER BEEN THE
EXPECTATION. THE FED HAS RAISE
RATES HIGHER AND WILL NOT
ALLOW A SOFT LANDING BY ALL
EXPECTATIONS. WE WILL TALK MORE
ABOUT THIS BUT IN TERMS OF THE
LENGTH OF THE DOWNTURN WE WILL
SEE THAT I AM FORECASTING, IT
WILL DEPEND CRITICALLY ON
INFLATION. IF THE DOWNTURN IS,
IN NO SMALL PART, BEING DRIVEN
BY INCREASED INTEREST RATES,
THE FED IS CONCERNED ABOUT
INFLATION. HOW LONG WE ARE IN
THIS SLOW PERIOD WILL DEPEND
CRITICALLY ON WHEN INFLATION
COMES UNDER CONTROL. IN A
MINUTE I WILL DESCRIBE THIS
GRAPH BUT THE FED IS EXPECTED
TO MOVE QUICKLY INTO THE
EMPLOYMENT CENTER -- SECTOR,
THE IMPORTANT PART OF THE
ECONOMY. ON THE RIGHT , WE HAVE
AN UPDATE THAT YOU CAN SEE THE
PATH OF WHAT WAS ORIGINALLY JOB
RECOVERY. JUST TO REMIND YOU,
THE LIGHTER SHADED LINE IS THE
LONGER TIME PATH, THAT IS THE
PATH OF JOB LOSS AND RECOVERY
DURING THE GREAT RECESSION.
SINCE THE BEGINNING OF THE
RECESSION ZERO POINTS JOBS
HAVE BEEN LOST DURING THE FIRST
PART OF THE GREAT RECESSION AND
THEN A SLOW RETURN TO THE
EMPLOYMENT LEVELS . YOU CAN
SEE, AT THE NATIONAL LEVEL, THE
BLUE LINE, IT TOOK MORE THAN
SIX YEARS TO REACH THE
PRE-GREAT RECESSION EMPLOYMENT
LEVELS. THE CITY WAS ABOUT FIVE
AND HALF YEARS. THE DARKER
LINES OF THE CURRENT SITUATION,
YOU CAN SEE A DRAMATIC DROP AT
BOTH THE NATIONAL LEVEL IN THE
BLUE LINE AND THE REDLINE . IS
THE PANDEMIC HIT, THERE WERE
CHANGES DURING THE PANDEMIC
PERIOD. THEN DURING A PERIOD OF
SUSTAINED GROWTH SINCE THEN,
JOB RECOVERY, WE WERE TRAILING
ACTUALLY, JUST SINCE THE SECOND
QUARTER OF THIS YEAR,
BASICALLY, WE HAVE REACHED
PRE-PANDEMIC LEVELS, AS DID THE
NATION. WE WERE JUST SLIGHTLY
BEHIND. THE FORECAST WE ARE
PROVIDING TODAY, IF THOSE ARE
CORRECT, IT WOULD BE THE NEAR
HIGH WATER MARK. THE
EXPECTATION IS THAT EMPLOYMENT
WILL FALL. IN PARTICULAR, IT
WILL BE BROAD-BASED, BUT
EXPECTED TO AFFECT A VARIETY OF
SECTORS , MANUFACTURING,
PROFESSIONAL BUSINESS SERVICES
AND CONSTRUCTION, PARTICULARLY
HARD. I THINK IT IS IMPORTANT
TO REMEMBER, THE NEXT SLIDE
WILL ILLUSTRATE, THIS DOWNTURN
, SORRY, SLIGHT DELAY AND
SLIDES, WE ARE GETTING USED TO
IT. THIS DOWNTURN WILL HIT ,
WHILE SOME SECTORS HAVE NOT YET
FULLY RECOVERED FROM THE
PANDEMIC, WE HAVE PURPOSELY
BEEN SHOWING YOU ON A QUARTERLY
BASIS SO YOU CAN TRACK HOW
BARS SHOW YOU THE TOTAL HE RED
RELATIVE TO FEBRUARY 2020,
PRE-PANDEMIC. WE HAVE
ESSENTIALLY COME ALL THE WAY
BACK WITH 5000 JOBS THAT ARE
SHOWN HERE. THIS DATA IS A
LITTLE BIT DATA. THE RECOVERY
OF THE JOBS , THE TOTAL NUMBER
OF JOBS IN THE REGION, AS YOU
CAN SEE FROM THE GRAY BARS, IT
SHOWS THE SECTOR LEVEL, HOW
EMPLOYMENT IS CHANGING.
HOSPITALITY, MANUFACTURING AND
TO SOME EXTENT GOVERNMENT,
STILL TRAIL THE UNEMPLOYMENT
LEVELS FROM PRE-PANDEMIC.
THINGS LIKE INFORMATION,
PROFESSIONAL BUSINESS SERVICES
ARE TRACKING AHEAD AND HAVE
BEEN KEY FOR US. IT WILL BE
DIFFICULT FOR MANUFACTURING
AND LEISURE BUT WE EXPECT THAT
TO HIT BEFORE THEY HAVE FULLY
RECOVERED. THAT GIVES YOU AND
IDEA OF HOW THINGS COULD LOOK
LOCALLY. ONE PARTICULAR AREA I
WANTED TO HIGHLIGHT, THE SLIDE
LOOKS FAINT ON MY SCREEN SO I
WILL RELOAD IT. I DON'T KNOW
WHY THAT LOOKS THE WAY IT DOES.
IT DOES NOT LOOK THAT WAY ON
MY SCREEN.
>> DIRECTOR NOBLE , IT LOOKS
CLEAR AND GREEN RIGHT HERE. WE
ARE LOOKING AT THE CONSTRUCTION
SECTOR SHARE IN SALES AND B&O
TAX REVENUE.
>> PERFECT AND THANK YOU. I
DON'T KNOW WHAT THAT WAS ABOUT.
THIS PARTICULAR AREA OF RISK,
THIS IS ONE THAT WE HAVE BEEN
CONCERNED ABOUT OVER THE YEARS,
IN TERMS OF ITS IMPACT ON STATE
REVENUES, IN THE LOCAL REGION,
WE EXPECT , WE HAVE HAD A
BUILDING BOOM IN THE LAST FIVE
YEARS. THE WAY CONSTRUCTION
ACTIVITY WORKS ON THE SALES TAX
I, ALL THE MATERIALS THAT GO
INTO A BUILDING ARE TREATED AS
IF THE SALE OR THE PURCHASE OF
THOSE MATERIALS OCCURS AT THE
JOB SITE. IF YOU BUILD AN
OFFICER IS TOWER, THERE IS WELL
OVER A COUPLE MILLION DOLLARS
OF MATERIAL , LET'S JUST SAY AN
OFFICER IS TOWER. THE CITY GETS
A SHARE OF ALL OF THAT
MATERIAL. THAT HAS BEEN A GREAT
ROOM FOR US. IT HAS GIVEN US A
COMPONENT OF SALES TAX AND
THIS CHART SHOWS YOU JUST OVER
THE LAST COUPLE OF YEARS THE
SHARE OF SALES TAX THAT HAS
COME FROM CONSTRUCTION AND,
AGAIN, THE BUSINESS AND
OCCUPATION TAX. FOR SALES TAX,
IT IS HOVERING AROUND 25%. IT
úHAS CALMED DOWN A LITTLE BIT,
IT SHOWS THE ECONOMY HAVE
PICKED UP, AS WELL. IN TOTAL,
THERE IS $100 MILLION ON AN
ANNUAL BASES IN REVENUE IN
THESE TWO SOURCES. THE CONCERN
HERE IS THAT THIS BUILDING
BOOM IS MAYBE NOT LIKELY TO
CONTINUE AT THE PACE IT HAS IN
THE PAST. WE WERE CONCERNED
ABOUT THAT EVEN BEFORE THE
INTEREST RATE ISSUES. WE WERE
CONCERNED BECAUSE THE DEMAND
FOR OFFICE SPACE, DUE TO THE
WORK FROM HOME ISSUES, HEAD
CHANGE SIGNIFICANTLY. THE
DOWNTOWN CORD DAILY, SOURCES
INDICATE THAT VACANCIES ARE
ALMOST AT 20%. OFFICE DEMAND IN
DOWNTOWN IS LOW AS IT WAS,
WHICH IT IS NOT LIKELY SOMEONE
IS GOING TO BUILD A NEW OFFICE
BUILDING. WITH INTEREST RATES
GOING UP, THAT FURTHER DETERRED
CONSTRUCTION. THE GOOD NEWS
IS, MAYBE ON THE APARTMENT
SIDE, WAREHOUSING, OVERALL
HOUSING DEMAND IS STILL STRONG
IN THIS AREA, VACANCY RATES ARE
LOW, EVEN WITH INTEREST RATES
GOING UP, WE DON'T EXPECT TO
SEE AS SIGNIFICANT A DROP ON
THE MULTIFAMILY DEVELOPMENT
SIDE AND THERE IS A
SIGNIFICANT AMOUNT OF THAT, AS
WELL. WE JUST WANT TO HIGHLIGHT
THAT CONSTRUCTION IS,
PARTICULARLY WITH SALES TAX,
IT IS A SIGNIFICANT COMPONENT,
SIGNIFICANT COMPONENT OF B&O,
WITH WORKING FROM HOME, OTHER
DYNAMICS AND NOW INTEREST
RATES, THERE IS REASON TO BE
CONCERNED ABOUT HOW THIS
PARTICULAR SECTOR WILL EVOLVE.
SO, THOSE ARE, THOSE OF THE
KEY THINGS WE WANT TO
HIGHLIGHT. IN TERMS OF
DEVELOPMENTS WE HAVE SEEN AND
SOME OF THE PARTICULAR RISKS
FOR THE CITY REVENUE STREAMS,
úWE WILL SHIFT NOW TO TALK ABOU
THE FORECAST AND HOW THE
FORECASTS, MOVING FORWARD,
SPECIFICALLY, HAVE CHANGED. WE
HAVE LOOKED AT BOTH THE
NATIONAL AND THE REGIONAL
FORECASTS. I WILL MOVE THROUGH
THIS CHART AND ILLUSTRATE AS WE
GO. A FEW COMMENTS BEFORE I
START, SO, THE FORECAST , IHS
MARKET, WHICH IS THE NATIONAL
PROGRAM TO WHICH WE SUBSCRIBE,
IS NOW PREDICTING A MILD
RECESSION FOR 2023. THAT IS A
SIGNIFICANT SHIFT FROM AUGUST.
HEADS UP IN LATE SEPTEMBER,
THE NEXT FORECAST WOULD INCLUDE
THAT AND THEN THAT WOULD BE
DELIVERED IN EARLY OCTOBER.
AND IT DID. THEY HAD BEEN
PREDICTING IT THAT THE GDP
WOULD GROW MODESTLY, JUST UNDER
1% NEXT YEAR. NOW THAT IS
EXPECTED TO ACTUALLY DECLINE.
THAT IS THE DEPRESSION
DEFINITION. IT COULD BE A
SHORT DOWNTURN SO RECOVERY
WOULD ACTUALLY BE IN THE SECOND
HALF OF NEXT YEAR. THE
UNFORTUNATE NEWS, ON TOP OF
THE RECESSION, THE RECOVERY
AFTER THAT, IT WILL BE MODEST.
WE ARE NOT EXPECTING TO COME
BACK TO CURRENT LEVELS OF
ACTIVITY FOR SOME TIME. I WILL
USE THE GRAPH TO ILLUSTRATE
THIS POINT. AGAIN, IT WILL SHOW
YOU HOW THE FORECASTING HAS
CHANGED OVER TIME. THIS WAS
THE ORIGINAL ARC OF EMPLOYMENT.
IT IS THE NATIONAL LEVEL
FORECAST. THE ORIGINAL, TO THE
LEFT, THAT IS THE ACTUAL DATA
UP UNTIL MID 2022, THE ACTUAL
RESULTS. YOU CAN SEE THE
EFFECTS OF THE PANDEMIC. AGAIN,
RELATIVE TO PRE-PANDEMIC T
LEVELS. YOU CAN SEE SIGNIFICANT
DROP ASSOCIATED WITH THE
PANDEMIC AND THE RECOVERY SINCE
WE HAD REACHED, WE HAD JUST
CROSSED BACK OVER TO
PRE-PANDEMIC LEVELS IN THE
EXPECTATION FROM MARCH AND/OR
APRIL FORECASTS IS THAT IT
WOULD BE A STEADY GROWTH GOING
FOR, MODEST, BUT STEADY. THE
FORECAST THAT WE USED FOR OUR
AUGUST UPDATE PREDICTED MORE
MODEST JOB GROWTH AND A
SLOWER PERIOD. AGAIN, THE
EXPECTATION WAS THAT WE WOULD
NOT SEE A SIGNIFICANT DIP IN
EMPLOYMENT BUT RATHER, JOB
GROWTH WOULD BE RELATIVELY
MODEST. THAT HAS BEEN
CONSISTENT WITH AN EFFORT TO
MANAGE, AGAIN, A SOFT LANDING
AND EFFECTIVELY BRING INFLATION
UNDER CONTROL WITHOUT A
SIGNIFICANT IMPACT ON
EMPLOYMENT. THE MOST RECENT
FORECAST AT THE NATIONAL LEVEL
, AS YOU CAN SEE, IS SHOWING
YOU THE EXPECTED DOWNTURN. IF
YOU MEASURE FROM THE PEAK ,
WHICH IS ESSENTIALLY NOW, TO
THE TROUGH IN THE LATTER PART
OF 2023, IT IS ABOUT A 2% DROP
IN THE TOTAL NUMBER OF JOBS IN
THE U.S. ECONOMY IS THE
FORECAST. THERE IS AN A BRIEF
PERIOD OF RECOVERY THAT BEGINS.
IN THE FIRST PART OF 2025 WE
REACH AGAIN THE PRE-PANDEMIC
LEVELS, BUT IT IS NOT UNTIL
2026 WE ACTUALLY REACH CURRENT
LEVELS. AGAIN, THE NATIONAL
LEVEL WAS ACTUALLY PRE-PANDEMIC
AT THAT POINT. A MODEST DROP,
AGAIN, 2%, A SLOW RECOVERY
FOR A PERIOD OF A YEAR AND A
HALF OR MORE, IN ORDER TO
RETURN TO CURRENT EMPLOYMENT
LEVELS. I DO WANT TO HIGHLIGHT
THE LAST PICTURE HERE. YES
SORRY, A DELAY AGAIN ON MY
SLIDES. ONE MOMENT. IT SHOULD
COME BACK. I HAVE ADDED THE
CURRENT PESSIMISTIC FORECAST.
AS YOU CAN SEE, THE
PESSIMISTIC FORECAST IS
ACTUALLY , THIS IS A SCENARIO
NOT ASSOCIATED WITH ANY
STANDARD PERIOD BUT RATHER
ASSOCIATED WITH WORLD
CONDITIONS DETERIORATING
FURTHER. THE WAR IN EUROPE,
AGGRESSION IN UKRAINE
ESCALATING FOR THE, POTENTIALLY
ONGOING PANDEMIC EFFECTS,
COVID-19 EFFECTS IN ASIA AND
ELSEWHERE BUT ALTOGETHER,
AFFECTS THAT START REDUCING
DEMAND AND PRODUCTIVITY AROUND
THE LOCAL ECONOMY AND
EMPLOYMENT FALLS AS A RESULT.
THIS IS NOW NOT WITH THE FETISH
DRIVING, JUST OVERALL
DEVELOPMENTS IN WORLD AFFAIRS,
IF YOU WILL, BRING ON LESS
FAVORABLE CONDITIONS. IF THAT
SCENARIO PLAYS OUT, A MORE
SIGNIFICANT DROP IN EMPLOYMENT,
CLOSER TO 5% AND EVEN A MUCH
SLOWER RECOVERY. WE WILL TALK
MORE ABOUT THE CHOICE BETWEEN
PESSIMISTIC AND THE BASELINE,
BUT I WANTED TO GET A SENSE OF
WHAT THAT WOULD LOOK LIKE. AT
THE LOCAL LEVEL, WE SEE
ESSENTIALLY THE SAME THING.
AGAIN, I WILL SHOW YOU THE
SAME PATTERN. THIS WAS THE
FORECAST BACK IN JULY. WE WERE
EXPECTING MODEST RECOVERY.
SLOW, BUT STEADY , JOB GROWTH
OVER THE NEXT COUPLE OF YEARS.
THAT HAS NOW SWITCHED. OUR
UPDATED FORECAST, AGAIN, THIS
IS THE EMPLOYMENT NUMBERS AND
THE UNDERLYING REVENUE FORECAST
WE WILL SHOW SHORTLY, YOU CAN
SEE THE SAME EVIDENCE AS A
NATION, IN THE SENSE OF JOB
LOSS. IF YOU MEASURE HERE THE
PEAK AT THE TROUGH, IT IS A
DROP OF ABOUT TWO PERCENTAGE
POINTS. ONE OF THE REASON THE
NEAR-TERM NUMBERS ARE HIGHER
THAN THEY WERE AT OUR AUGUST
FORECAST IS BECAUSE OF SOME OF
THE DATA FROM THE STATE LEVELS.
EMPLOYMENT IS ACTUALLY RUNNING
A LITTLE HIGHER THAN WE
THOUGHT. AGAIN, PROJECTION IS,
AGAIN, THIS IS THE BASELINE, A
LOSS OF ABOUT 2% IN JOB COUNT
AND THE RECOVERY AFTER THAT.
THE RECOVERY AT THE LOCAL LEVEL
IS EXPECTED TO BE SOMEWHAT
FASTER. WE COULD BE RETURNING
TO CURRENT EMPLOYMENT LEVELS
IN THE EARLY PART OF 2025.
THAT IS A NOTABLE BENEFIT OF
THE HEALTH OF OUR LOCAL
ECONOMY. AGAIN, STILL A
NEAR-TERM DOWNTURN. YOU WILL
SEE THAT IN REVENUES, AS WELL.
I DO WANT TO POINT OUT THAT THE
PESSIMISTIC SCENARIO , AT THE
REGIONAL LEVEL, WILL PLAY OUT,
WE USE THOSE AS INPUT, THAT IS
NOT SURPRISING, A SIGNIFICANTLY
LARGER JOB LOSS , AS MUCH AS 5%
OR MORE, AND AGAIN, APPEARED OF
SLOW RECOVERY INTO 2026. YOU
CAN GET A SENSE OF THAT AT
THIS DOWNTURN, THIS REGIONAL
DOWNTURN DOES UNDERLIE REVENUE
FIGURES YOU WILL SEE SHORTLY.
I DID ONE SPEND A LITTLE BIT OF
TIME TO TALK ABOUT THE IHS
NATIONAL FORECAST AND PUT IT IN
SOME CONTEXT. THE NEXT LIGHTS
HAVE TO DO WITH THE CHOICE
BETWEEN THE BASELINE VERSUS THE
PESSIMISTIC OR OPTIMISTIC
FORECAST. WE THOUGHT IT WOULD
BE HELPFUL TO PUT THE IHS
FORECAST INTO SOME CONTEXT.
UNFORTUNATELY, THE "WALL STREET
JOURNAL" ACTUALLY CONDUCTS A
REGULAR SURVEY THAT ALLOWS US
TO DO THAT. WE REGULARLY
SURVEY AROUND 70 ACADEMIC AND
BUSINESS ECONOMISTS REGARDING
THEIR FORECASTS, AND THE
LITTLE GRAY DOTS IN THE PICTURE
REPRESENT THE DATA POINTS FROM
THEIR SURVEYS THE "WALL STREET
JOURNAL" DID, THOSE
RESPONDENTS. IT IS THE BLUE
LINE ON THE GRAPH THAT IS THE
AVERAGE OF THE BLUE DOTS ON
THE GRAPH, THE AVERAGE OF THOSE
RESPONSES AND THE RED IS THE
IHS MARKIT FORECAST.
PARTICULAR LE AT THE END OF
2023, JUST TO ILLUSTRATE THIS,
I WILL TALK THROUGH IT BUT THE
BASIC POINT HERE IS THAT IHS
MARKIT TENDS TO BE
CONSERVATIVE. THEIR BASELINE
FORECAST IS SOMEWHAT
CONSERVATIVE RELATIVE TO OTHER
FORECASTERS. FOR INSTANCE, THE
FIRST ELEMENT OF THE CHART IS
FOR CPI YOU, THE BROAD MEASURE
OF INFLATION. A RANGE YOUR
FORECAST, AROUND 2% , TO WELL
ABOVE 5% AMONG RESPONDENTS
AVERAGED SOMETHING AROUND 3
1/4. IHS MARKIT A SLIGHTLY
HIGHER THAN THAT. THEY ARE
PREDICTING CERTAINLY A HIGHER
INFLATION FORECAST THAT
TRANSLATES ESSENTIALLY TO
CONSERVATISM HERE. YOU WILL SEE
THIS ON THE NEXT FLIGHT. THAT
MEANS THAT THAT WILL KEEP
INTEREST RATES SOMEWHAT HIGHER
THAN THEY WOULD OTHERWISE. THE
NEXT POINT OF COMPARISON IN
THE CHART IS THE FEDERAL FUNDS
RATE, THE RATE WHICH THE
FEDERAL RESERVE LENDS MONEY TO
OTHERS LIKE THEY JUST RAISED
THIS MORNING. AGAIN, THE
FORECAST, THE AVERAGE FORECAST
IS JUST ABOVE 4% IS BEING WHAT
THEY EXPECT TO SEE IN 2023.
MOST OF THOSE ARE EXPECTED TO
GO UP AND COME BACK DOWN BY
THEN, JUST TO BE CLEAR. IHS
MARKIT IS EXPECTING THAT IN
2023 IT WILL BE CLOSER , ABOVE
4 1/2%. AGAIN, CONSERVATISM
BECAUSE THOSE HIGHER INTEREST
RATES WILL RIPPLE INTO LEFT
OVERALL ECONOMIC ACTIVITY. THEY
ARE PREDICTING A SLIGHTLY
HIGHER UNEMPLOYMENT RATE , YOU
CAN SALE THE NEXT LINE. THE
NEXT ONE, THEY'RE PREDICTING A
SOMEWHAT LOWER GROWTH IN THE
GDP. SO YOU HAVE SOME EVIDENCE
HERE THAT IHS IS SOMEWHAT
CONSERVATIVE. EVEN IN THEIR
BASELINE, IT IS NOT, YOU KNOW,
IT IS NOT NECESSARY MIDPOINT,
IF YOU WILL. I THINK THAT IS
INFORMATIVE . THAT TAKES US TO
THE NEXT ISSUE, WHICH IS THE
CHOICE BETWEEN THE BASELINE
AND THE PESSIMISTIC FORECAST.
IT HAS BEEN OUR HABIT, WE ARE
PROVIDING THIS RECOMMENDATION
FOR YOU BEFORE WE SHOW YOU THE
REVENUE FIGURES BECAUSE THAT IS
HOW WE AND YOU THE DECISION. WE
DID THIS ANALYSIS AND MADE
THIS JUDGMENT AND FOLLOW
THROUGH TO SEE WHAT THE IMPACTS
WOULD BE ON THE REVENUE SIDE.
AGAIN, JUST BOTH TO SUMMARIZE
AND TO LEAD TO THIS CONCLUSION,
THINGS HAVE BEEN DETERIORATING.
YOU KNOW, OVER THE PAST COUPLE
OF MONTHS, WE ARE NO LONGER
EXPECTING THE SOFT LANDING
THAT HAVE BEEN HOPED FOR. THE
CONSENSUS AMONG FORECASTERS,
YOU CAN SEE THAT IN THE LAST
CHART, INCLUDING OUR OWN, IS
THAT A MODEST SLOW DOWN IS
LIKELY, TECHNICALLY A
RECESSION, IS LIKELY, MOST OF
OUR FORECASTERS ARE ALSO
ACKNOWLEDGING THERE IS A BIGGER
, THERE IS THE RISK OF A DEEPER
DOWNTURN AHEAD, AS I MENTIONED,
IF THE WAR ESCALATES . THAT IS
REALLY MUCH MORE OF THE
PESSIMISTIC SCENARIO. WHAT WE
KNOW IS THAT THE FORECAST WE
ARE LOOKING FOR FROM IHS, THEIR
OCTOBER FORECAST, IS, AGAIN,
INCORPORATING MOST OF THIS
EXPECTATION ABOUT BAD NEWS, AS
YOU KNOW. THEY HAVE
INCORPORATED THE PERSISTENT
INFLATION ASSUMPTION, HIGHER
INTEREST RATES AND THE LIKE.
THEIR FORECAST DOES A PRETTY
GOOD JOB OF CAPTURING WHAT WE
EXPECT NOW. IT IS STILL
POSSIBLE, AGAIN, THAT WORLD
EVENTS WILL TURN AGAINST US, IF
YOU WILL. THAT IS SPECULATIVE.
WE HAVE ALSO SEEN IN THE
PREVIOUS CHART THAT THE IHS
BASELINE IS NOT PARTICULARLY
AN OPTIMISTIC BASELINE, IF YOU
WILL. IT IS A RELATIVELY
CONSERVATIVE, MAINSTREAM
FORECAST. ON THAT BASIS, WE ARE
RECOMMENDING THAT THE BASELINE
SCENARIO BE ONE THAT IS USED .
AS WE MOVE TO THE REVENUE
PORTION OF THE PRESENTATION, WE
WILL SHOW YOU THE BASELINE
SCENARIO , WE HAVE A COUPLE
SLICED TO GIVE YOU A SENSE OF
WHAT THESE COULD LOOK LIKE ON
THE PESSIMISTIC SCENARIO. WITH
THAT, I WILL MOVE NOW TO THE
ACTUAL REVENUE PRESENTATION. I
WILL DIE WRITING. WE WILL SHOW
YOU ALL THREE YEARS HERE
YEAR-BY-YEAR. THAT WILL GIVE
YOU A CHANCE TO UNDERSTAND AND
WE HAVE THE CHANCE TO PROVIDE
YOU WITH A LITTLE BIT OF
EXPLANATION. IN TERMS OF THE
CHARTS, THE TWO COLUMNS HERE,
THERE ARE THREE COLUMNS. THE
FIRST ONE, THE REVENUE FORECAST
THAT IS CONTAINED IN THE
MAYOR'S BUDGET, THE MAYOR'S
PROPOSED BUDGET, DIFFERS
SLIGHTLY THAN THE ONE WE
PRESENTED TO YOU IN AUGUST. THE
BUDGET OFFICE PROVIDED A MEMO.
THE MAJOR DIFFERENCES ARE RIGHT
AROUND GRANTS AND THE LIKE.
THAT IS NOT A BIG DIFFERENCE.
THE SECOND COLUMN IS NOW OUR
UPDATED FORECAST. THE THIRD
COLUMN IS THE COMPARISON
BETWEEN THE TWO. I WILL SPEND
TIME ON THE COMPARISON BETWEEN
THE TWO SO YOU CAN SEE WHAT HAS
CHANGED. PROPERTY TAX IS QUITE
PREDICTABLE. WE HAVE NO CHANGE
THERE. RETAIL SALES, THOSE ARE
ACTUALLY INCREASING THE
FORECAST FOR THAT. FOR THIS
YEAR WE HAVE SEEN ACTUAL
REVENUES OUT OF THE FORECAST,
IN PARTICULAR, SOME
NONRECURRING PAYMENTS, PEOPLE
ARE MAKING UP FOR PAST UNDER
MAINTENANCE. LOOKING FORWARD,
AGAIN, EMPLOYMENT IS ACTUALLY
MOVING HIGHER THAN WE THOUGHT.
WE THINK FOR THE REMAINDER OF
THE YEAR WE COULD DO A LITTLE
BETTER THAN WE ACTUALLY
PREDICTED. YOU KNOW, JUST DOWN
SLIGHTLY , A MINOR CORRECTION.
UTILITY TAX, PRIVATE, THIS HAS
TO DO WITH PAYMENT, TIMING OF
PAYMENTS, ONE OF THE MAJOR
PAYERS HAS A HABIT OF BEING A
MONTH LATE. WE EXPECT ABOUT $1
MILLION MORE THAN WE WOULD'VE
HAD OTHERWISE. OTHERWISE, THE
OTHER BIG CHANGE YOU CAN SEE
DOWN AT THE BOTTOM IS THE
ADDITIONAL 4 MILLION IN
LICENSES, PERMITS, INTERESTING,
AND OTHER. THE BIGGEST
COMPONENT OF THAT IS ACTUALLY
ON THE INTEREST INCOME SIDE.
IF THERE IS ANY BENEFIT TO THE
INTEREST RATE INCREASES, THIS
IS THE ONLY ONE I CAN THINK OF.
OUR OWN CASH BALANCES WILL BE
EARNING A HIGHER RATE.
ESSENTIALLY WE INVEST OUR CASH
BALANCES AT THE FED RATE. WE
PUT IN THE VERY SHORT-TERM
SECURITIES . WE WILL TALK MORE
ABOUT THAT BUT THOSE RATES HAVE
BEEN GOING UP AND WE ARE
EXPECTING TO SEE THIS IN
SUBSEQUENT YEARS GOING UP AND
MAINTAINING AT A HIGHER LEVEL.
THAT MAKES A BIG DIFFERENCE.
THE LAST POSITIVE NUMBER IS
$1.5 MILLION ASSOCIATED WITH
PAYROLL TAX. THESE ARE
CONTINUED THROUGH THE SECOND
QUARTER AND BEYOND THROUGH
AUGUST TO GET LATE PAYMENTS
FOR 2021. FOLKS ARE SORTING
OUT WHAT THEIR OBLIGATIONS
REALLY ARE. IT WAS ABOUT $1.5
MILLION ADDITIONAL LATE
PAYROLL TAX PAYMENTS WE
RECEIVED. ALL THE PAYMENTS
ASSOCIATED WITH 2021
OBLIGATIONS GO TO THE GENERAL
FUND. WE WILL TALK LATER ABOUT
PAYROLL TAXES FOR 2022 AND
BEYOND. THESE DELAYED PAYMENTS
GO INTO THE GENERAL FUND. OUR
NET, WE ARE ACTUALLY SHOWING AN
INCREASE IN GENERAL FUND
REVENUE FOR 2022 , JUST OVER
$9.5 MILLION. THAT IS THE GOOD
NEWS WE HAVE TO OFFER. MOVING
ON TO 2022, THIS IS WHEN YOU
START TO SEE THE EFFECTS OF
THE NEW FORECAST, THE NEW
ECONOMIC FORECAST COMING INTO
PLAY. AGAIN, THE SAME STRUCTURE
AS BEFORE, THE FIRST OF THE
2022 COLUMNS IS THE PROPOSED
BUDGET. THE SECOND SET OF
COLUMNS IS THE NEW, UPDATED
FORECAST AND THE THIRD COLUMN
IS THE DIFFERENCE BETWEEN THE
TWO. AGAIN, I WILL HIGHLIGHT
THE DIFFERENCES YOU SEE HERE.
ON PROPERTY TAX, PERCENTAGE
TERMS, VERY SMALL CHANGE, BUT
A $1.3 MILLION DEDUCTION. IT IS
ENTIRELY ASSOCIATED WITH NEW
CONSTRUCTION. THE WAY STATE LAW
WORKS, OUR PROPERTY TAX
REVENUES ARE ALLOWED TO
INCREASE BY 1% OVER THE
PREVIOUS YEAR, PLUS THE VALUE
OF NEW CONSTRUCTION. ONE OF
THE KEY COMPONENTS OF DRIVING
INCREASES IN PROPERTY TAXES IS
NEW CONSTRUCTION. AGAIN, GIVEN
THE INTEREST RATES WE ARE
SEEING AS SOME OF THE DATA WE
ARE SEEING ON THE INTAKE OF
PERMITTING, WE HAVE REASON TO
THINK THAT NEW CONSTRUCTION
WILL BE LOWER THAN WE HAVE
ANTICIPATED IN AUGUST. THAT IS
ABOUT A 3 MILLION DOCTORS $1.3
MILLION HITS. RETAIL SEX
PLANS RETAIL SALES TAXES
RELATIVELY SMALL. ALMOST $5
MILLION IS EXPECTED IN RETAIL
SALES, ALL TIED TO SLOWDOWNS
IN THE REGIONAL ECONOMY WE
SHOWED YOU AND HOW IT
MANIFESTED BUT THAT WILL THEN
AFFECT CONSUMPTION AND
EVENTUALLY TAXABLE ACTIVITY, AS
WELL. THERE IS SOME GOOD N█EWS
YOU WILL NOTICE A SIGNIFICANT
POSITIVE INCREMENT IN PARKING
METER REVENUE. PARKING DEMAND
HAS INCREASED AND IS INCREASING
FASTER THAN IT HAD BEEN
PROJECTED IN AUGUST. THE WAY
THE PARKING METER RATES WORK IS
THAT WE SET RATES IN RESPONSE
TO DEMAND. WITH INCREASED
DEMAND AND FEWER VACANT SPOTS ,
CITY POLICY CALLS FOR MODEST
INCREASES IN PARKING RATES IN
THE METER RATES, THE ACTUAL PER
HOUR RATES . INCREASED DEMAND,
INCREASING RATES AND YOU HAVE
A REVISION IN THOSE REVENUES.
"THIS IS US" THE CHANCEL
REVENUE STREAM OVER ALL. AGAIN,
TOWARDS THE BOTTOM, WE SEE THE
INTEREST STARTING TO HAVE A
POSITIVE INFLUENCE ON THAT LAST
CATCH ALL. THE BIGGEST CHANGE
THERE IS, AGAIN, IN INTEREST
EARNINGS FROM OUR CASH
BALANCES. THE NEBULOUS THING
IS YOU ADD THEM ALL UP AND
THERE IS A REDUCTION OF ABOUT
$4.5 MILLION IN THE GENERAL
FUND FORECAST FOR 2023. THE
LAST ONE WE WILL SHOW YOU IS
THE LAST OF THE BIENNIUM . YOU
CAN SEE THE COMPOUNDING
EFFECTS. I WILL EXPLAIN MORE OF
THIS IN THE COMPOUNDING
EFFECTS OF THE DOWNTURN. AGAIN,
TOP TO BOTTOM, LOWER FORECAST
FOR NEW CONSTRUCTION HERE. WE
GET A COMPOUNDING EFFECT. THE
NEW CONSTRUCTION REDUCTION IN
2023 IS A SMALLER TAX BASE .
THAT SHOULD CARRY INTO 2024.
WE ARE GROWING THE TAX BASE BY
A 1% BUT WE EXPECTED TO BE
SMALLER IN 23 THROUGH. WE
EXPECT IT TO BE SOMEWHAT LESS
CONSTRUCTION ACTIVITY AND
PRODUCTION. JUST OVER $2
MILLION FORECAST THERE. FOR
SALES, YOU GET TO SEE THE
COMPOUNDING EFFECTS. THE BASE
IN 2023, WE ARE EXPECTING LESS
REVENUE AT THE BASE THAT WE
CARRIED IN 2024 WILL BE
SMALLER AND WE EXPECT LESS
GROWS IN 2024 THAN WE DID IN
AUGUST, AS WELL. THOSE EFFECTS
GROW WITH TIME. AGAIN, HERE YOU
ARE SEEING, FOR SALES, IT IS
ALMOST A $6.5 MILLION REDUCTION
FROM THE AUGUST FORECAST. AND
THERE IS A AND IT DOES MY AN
ADDITIONAL COLUMN ADDED. THE
BALANCE DEPOSITS IS REALLY
BALANCING EXPENDITURES AND
REVENUES ACROSS ALL THREE
YEARS. THE ADDITIONAL REVENUES
IN 2022 CAN HELP FUND
ACTIVITIES IN 2023 AND 2024.
MOVING DOWN THAT COLUMN YOU CAN
SEE THE INCREASED PARKING
METER REVENUES AND, ALSO, THOSE
RETURNS MAKING A POSITIVE
DIFFERENCE. THE NET HERE IS
MORE SUBSTANTIAL COME ABOUT
14.5 MILLION. I THINK IT IS
WORTH NOTING THAT ACTUALLY THE
ONGOING, THE FORECAST FOR 2024
IS ALMOST $15 MILLION LESS THAN
IT WAS BEFORE . WHEN WE START
2025, WE WILL HAVE THAT MUCH
LESS, THAT IS REALLY THE
ONGOING IMPACT WE ARE SEEING IN
THIS FORECAST. AND THEN, THE
THREE-YEAR TOTAL IS JUST UNDER
$9.4 MILLION AGAIN IN THE
GENERAL FUND REVENUE. THAT IS
THE GENERAL FUNDS UPDATE. A
REDUCTION IN 2023, ONCE AGAIN,
A REDUCTION IN 2024. THE NET IS
ABOUT A $10 MILLION REDUCTION.
ONE NOTE, IF YOU ADD, OVER
THREE YEARS, FEW OUT OF THE
REVENUE, IT IS ESSENTIALLY $5
MILLION OF THE GENERAL FUND
REVENUE OVER THOSE THREE YEARS.
IN TERMS OF THE OVERALL IMPACT,
EXCUSE ME, THE OVERALL
REVENUE, IT IS RELATIVELY
SMALL. YOU HAVE A DOWNTOWN
PLANS DOWNTURN FORECAST THAT IS
NOT A DRAMATIC ONE. BEFORE I
MOVE ON, WE WILL TALK A LITTLE
BIT , ARE THERE ANY QUESTIONS?
I JUST WANT TO MAKE THAT
AFFIRMATIVE INQUIRY.
>> THANK YOU, DR. NOBLE . I
THINK IT WOULD BE GREAT FOR US
TO, AGAIN, UNDERSCORE WHAT YOU
JUST SAID, IF THIS WAS JUST THE
$9.4 MILLION FOR THE GENERAL
FUND REDUCTION, IT IS NOT THAT
SIGNIFICANT. WE COULD PROBABLY
ADJUST FOR IT IN THE IMMEDIATE.
GIVEN THE INFORMATION YOU WILL
SHARE, YOU WILL CONTINUE TO
ELABORATE, THE EXCISE TAX AND
OTHER REVENUE STREAMS, IT DOES
MAKE FOR THE ENTIRE PICTURE TO
BE REALLY PRETTY GRAVE.
DIRECTOR, PLEASE GO AHEAD.
>> THANK YOU, DIRECTOR NOBLE
FOR THIS PRESENTATION. I AM
WONDERING, THIS MIGHT BE
SOMETHING YOU'RE PLANNING TO
GET INTO, SO I WILL GET INTO IT
, THAT IS A TOTALLY APPROPRIATE
RESPONSE, I WAS WONDERING IF
YOU COULD SPEAK TO THE
CORRECTIVE ACTIONS FROM THE
FEDS THAT MIGHT RESULT IN
HAVING TIPPED US INTO A
RECESSION, HOW QUICKLY OR WHAT
INDICATORS DO WE KNOW THEY
WOULD BE LOOKING AT IN ORDER
TO REVISES INTEREST RATES IN
THE OTHER DIRECTION TO THEN
SORT OF BRING US BACK OUT OR
TRY TO STABILIZE OR FIND SORT
OF A NEW NORMAL? DO YOU HAVE
ANY INSIGHT INTO WHAT THAT
MIGHT LOOK LIKE?
>> I HAVE SOME. REALLY, IT IS
WHAT WE KNOW, THE FED HAS BEEN
REMARKABLY TRANSPARENT ABOUT
WHAT IS MOTIVATING ITS ACTIONS.
THEY PARTICULARLY HAVE FOCUS,
FOR INFLATION, THE VERY FIRST
SLIDE , I PROBABLY SHOULD HAVE
EMPHASIZED THAT MORE THE TIME,
THE FACT THAT INFLATION,
PERSISTENT , HIGH INFLATION HAS
MOVED INTO THINGS BEYOND JUST
FOOD AND ENERGY. THAT IS OF
PARTICULAR CONCERN TO THE FED.
THEY ARE ALSO, THEY ARE
PARTICULARLY CONCERNED ABOUT
WAGE INCREASES. THE CONCERN IS
THAT INFLATION STARTS TO FEED
ITSELF. ONCE THE PRICES ARE
HIGHER, WORKERS,
UNDERSTANDABLY, ASK FOR HIGHER
WAGES IN ORDER TO COMPENSATE
FOR HIGHER PRICES. THAT THEN
INCREASES THE WAGE BILL FOR
COMPANIES. THEY THEN INCREASE
PRICES AND YOU END UP IN AN A
VIRTUOUS CYCLE OF PRICE
ESCALATION. THEY RECOGNIZE THAT
FOOD ENERGY PRICES FLUCTUATE.
THEY WILL BE PARTICULARLY
INTERESTED IN HOW THE LABOR
MARKET IS RESPONDING AND HOW WE
ARE RESPONDING. WE AND THEY
WILL CONTINUE TO MONITOR THOSE
THINGS VERY CLOSELY. ONE THING
TO CONSIDER, INFLATION IS
REALLY THE RATE OF CHANGE OF
PRICES. ONCE ENERGY PRICES
SETTLE IN AT RELATIVELY HIGHER
LEVELS AND STAY THERE, AND
DIFFERENT LEVELS TO WHERE THEY
PERCOLATE THROUGH THE WHOLE
ECONOMY, WHEN YOU THINK ABOUT
THIS, ALL GOODS AND PRODUCTS
YOU BUY OR DELIVERED SOMEHOW.
úENERGY PRICES AFFECT
PRODUCTION IN THAT WAY. THOSE
THINGS CAN CAUSE ENERGY PRICES
TO INCREASE HIM. THAT HAS BEEN
A MAJOR DRIVER IN YOUR UP. IT
IS THE RATE OF INCREASE. IF
ENERGY PRICES SETTLE IN IT IS
SOMEWHAT HIGHER LEVEL THAN IT
HAS BEEN IN THE PAST, UNTO
ITSELF IT WON'T BE A PROBLEM.
THE ECONOMY WILL ADJUST. BUT
THE BOTTOM LINE IS , CORE
INFLATION AND WAGE INCREASES
AND WE WILL TRACK THOSE
OURSELVES.
>> OKAY. WITH THAT, I WILL MOVE
ON. I WILL SPEND A MOMENT, THIS
NEXT SLIDE IS TALKING TO SOME
OF THINGS WE ALREADY SAID. I
AM GOING TO JUST GIVE YOU A
LITTLE BIT ABOUT WHAT IS IN
THE PESSIMISTIC SCENARIO. IT IS
NOT THE ONE WE ARE
RECOMMENDING, BUT I WANT TO
GIVE YOU SOME FLAVOR FOR IT. IN
A FOCUS ON RETAIL SALES AND
B&O, THOSE ARE THE ONES THAT
ARE MOST AFFECTED BY THE
DIFFERENT SCENARIOS. THERE
COULD BE SOME OTHER IMPACTS,
FOR CERTAIN, BUT THESE ARE
REALLY THE KEY DRIVERS. HERE
ARE THE BASELINE FORECASTS,
THE NUMBERS HERE MATCH THE
PREVIOUS SLIDE. THE PESSIMISTIC
IS IN GREAT. THE ABSOLUTE
DIFFERENCES LOOK PERHAPS
RELATIVELY SMALL . YOU WILL
NOTE THAT THEY INCREASE OVER
TIME. YOU GET THAT SAME KIND OF
COMPOUNDING EFFECT AS WE SAW IN
THE PREVIOUS SLIDE. THE
DOWNTURN IS CONTINUING TO
ACCELERATE INTO 2023 AND 2024
IN THIS SCENARIO. IF YOU ADDED
UP, ON THE NET, THE THREE-YEAR
DIFFERENCE ON THE RETAIL SALES
EXCISE TAX SIDE IS ABOUT $40
MILLION. THE VAST MAJORITY OF
THAT IS IN THE SECOND AND
THIRD YEAR HERE. THE B&O IS
ACTUALLY MORE, 50 MILLION. THE
GENERAL FUND ALONE, THE
PESSIMISTIC SCENARIO IS THE ONE
THAT PLAYS OUT, WE HAVE A MUCH
MORE DIFFICULT SCENARIO AND A
$90 MILLION LOSS RELATIVE TO
WHAT WE HAVE SHOWN YOU OVER THE
THREE YEARS TO GENERAL FUND
REVENUES. AGAIN, I DON'T WANT
TO DISCOUNT THIS AS A
POSSIBILITY, BUT THIS
SCENARIO, AGAIN, IS ASSOCIATED
WITH WORLD EVENTS DEVELOPING
OTHERWISE THE MOST FOLKS ARE
EXPECTING AT THIS POINT. IT IS
WORTH KEEPING IN MIND . NOW I
WILL SHIFT , AS FORECAST
COUNCIL DINGLEY POINTED OUT,
THEY ARE SIGNIFICANT STREAMS
AND CHALLENGING. AGAIN, THE
STRUCTURE HERE IS THE SAME. IT
WILL GO YEAR BY YEAR, JUST TO
REMIND YOU OF THE FORMAT OF
THIS TABLE AND THESE REVENUES.
THE FIRST PART, THE FIRST
SECTION IS GENERAL GOVERNMENT
REVENUES. THEY DON'T
TECHNICALLY GO TO THE GENERAL
FUND , BUT THESE ARE ALL
SUPPORTING A VARIETY OF GENERAL
FUND ACTIVITIES. THE PAYROLL
AND RELATED, AS YOU KNOW,
PAYROLL TAX HAS A SET OF
DESIGNATED USES. THE ADMISSIONS
TAX IS DEDICATED TO CULTURE.
SWEETENED BEVERAGE TAX IS FOR
FOR DEDICATED PURPOSES,
SHORT-TERM RENTAL AND THEN THE
EXCISE TAX LARGELY RESOLVED
FOR CAPITOL, ALSO CURRENTLY
ELIGIBLE FOR AFFORDABLE
HOUSING. THERE ARE OTHER SETS
OF REVENUES, TRANSPORTATION
SPECIFIC, BUT GIVEN THE OVERALL
INVESTMENT , THESE REALLY DO
AFFECT OVERALL BALANCING.
ALSO, THINGS THAT ARE
HIGHLIGHTED IN BLUE ARE THINGS
THAT THE FORECAST OFFICE
DIRECTLY FORECASTS , THE
OTHER, THE BUDGET OFFICE HAS
THE LEAD AND WE COLLABORATE ON.
ON THE TRANSPORTATION SIDE,
THE SALES AND USE TAX, THERE'S
A SHARE OF THE SALES TAX THAT
GOES TO TRANSPORTATION THAT IS
APPROVED FOR THE VEHICLE
LICENSE FEES, TRANSPORTATION ,
PARKING TAX AND THE SCHOOL
ZONE CAMERAS ARE DEDICATED TO
TRANSPORTATION, AS WELL. THAT
IS THE LAST OF THOSE. IN TERMS
OF CHANGES FOR 2022, THEY ARE
ALL RELATIVELY SMALL, EXCEPT,
NOTABLY, INTO REAL ESTATE
EXCISE TAX. WE WILL TALK MORE
ABOUT PAYROLL TAX BUT WE ARE
NOT CHANGING THE FORECAST FOR
THIS YEAR. ADMISSIONS TAX ALSO
NOT CHANGING. THE SWEETENED
BEVERAGE TAX FORECAST, THAT IS
DOWN. THAT IS MORE BECAUSE OF A
TIMING ISSUE AND UNDERSTANDING
THAT SOME OF THE PAYMENTS THAT
WERE RECEIVED IN 2022 WERE
OBLIGATIONS FROM THE PREVIOUS
YEAR. WE CAN THINK OF THE BASE
IS SMALLER THAN ANTICIPATED.
SHORT-TERM RENTALS, JUST MORE
ACTIVITY THAN WE FORECAST. THE
REAL ESTATE EXCISE TAX IS DOWN
SIGNIFICANTLY. I WOULD NOTE
THAT $95 MILLION IS STILL MORE
OF A BUST YEAR HISTORICALLY
OF THOSE REVENUES. WE WILL GET
INTO THIS FULL SLIDE AND TALK
ABOUT THE REET FORECAST BUT
THE CHANGE IN INTEREST RATE
PLUS AND THE CHANGES FOR DEMAND
AND HOUSING WILL REDUCE BOTH
THE VOLUME AND VALUE OF REAL
ESTATE TRANSACTIONS. THE REAL
ESTATE EXCISE TAXES DIRECTLY
ATTACKS ON REAL ESTATE
TRANSACTIONS. WE HAVE ALREADY
SEEN SOME OF THAT SLOW DOWN IN
THE DATA. THIS IS REFLECTING
WHAT WE HAVE SEEN IN 2022,
ACTUAL PAYMENTS TO DATE ARE
LOWER THAN WE HAVE EXPECTED. WE
HAD THE ORIGINAL $106 MILLION
FORECAST. AS YOU SEE IN A
MOMENT, MORE SIGNIFICANT
IMPACTS ARE PROJECTED FOR
SUBSEQUENT YEARS. LET ME PUT UP
2022 NOW. 2023. WE WILL RETURN
TO TALK ABOUT PAYROLL. THE
ADMISSIONS TAX, NO CHANGE.
SWEETENED BEVERAGE, THAT SAME
EFFECT IS RIPPLING INTO FUTURE
YEARS HERE, AS WELL. AND THEN
REET, MUCH MORE SUBSTANTIAL
DEDUCTION. WE HAD ALREADY
ANTICIPATE D SOME SORT OF A
SLOWDOWN BUT A MUCH MORE
SIGNIFICANT REDUCTION WITH THE
CHANGE IN THE FORECAST. AGAIN,
HAVE A SLIDE THAT FOLLOWS A
TALK ABOUT THAT. WE WILL GET
INTO MORE DETAIL BUT IT IS ON
THIS PAGE. MODEST REDUCTIONS IN
SALES TAX FOR TRANSPORTATION,
OVERALL SALES TAX COMES DOWN.
A MODEST REDUCTION IN PROPERTY
TAX, LESS OVERALL INACTIVITY ,
LESS FOLKS PAYING,
BOTTOM-LINE. 2024, THE SAME
CATEGORIES ARE MOVING AND
COMPARABLE LEVELS, YOU START TO
SEE THE COMPOUNDING EFFECTS,
THE BASE IS SMALLER BECAUSE IT
AFFECTED US IN 2023 AND, AGAIN,
WE ARE PROJECTING OVERALL LESS
ACTIVITY AT 2024. THE REDUCTION
IN SWEETENED BEVERAGE,
SUBSTANTIAL REDUCTION IN REAL
ESTATE EXCISE TAX AND ON THE
TRANSPORTATION SIDE, SALES TAX
, AS WELL. AT A THREE-YEAR
TOTAL, OBVIOUSLY, THE NUMBER
THAT JUMPS UP THE PAGES THE
IMPACT TO REAL ESTATE EXCISE
TAX, OVER 64 MILLION. AGAIN,
ACROSS THE PAGE, THE ORIGINAL
FORECAST HAD BEEN FOR ALMOST
300 MILLION. THIS IS A 20% OR
MORE REDUCTION THERE. THIS IS A
NOTABLE INCREASE OVER THAT
PERIOD. LET'S TALK A LITTLE BIT
MORE ABOUT WHAT IS GOING ON.
THIS IS JUST SOME OF THE
NARRATIVE IRONY PROVIDED TO
YOUR. WE WILL TALK ABOUT REET
NOW. I WILL SHOW YOU THE CHART
IN JUST A MOMENT. AGAIN, IHS
MARKIT FORECAST FOR THE HOUSING
MARKET HAS CHANGED
DRAMATICALLY. WE WILL
ILLUSTRATE THAT. THEY ARE
CHANGING DRAMATICALLY BECAUSE
THEY ARE SEEING INTEREST RATE
RISE FASTER , BOTH FASTER AND
HIGHER THAN THEY HAD EXPECTED.
AGAIN, WE CAN LOOK HERE TO SEE
HOW EXPECTATIONS HAVE CHANGED.
AGAIN, BACK IN MARCH, EXCUSE
ME, THE APRIL FORECAST,
EXPECTATIONS ON THE LEFT WERE
THE HOME PRICE INDEX, TAKING
2021 AS THE BASE. THE
EXPECTATION IS THAT HOME
PRICES, HAVING A REMARKABLY
BIG JUMP OVER THE 2021 YEAR,
YOU CAN SEE THE INCREASE
STARTING AT THE BEGINNING OF
2022 AFFECTING THE LAST HALF
OF 2021, MORE THAN 10%.
EXPECTATION WAS TO HAVE A
STEADY INCREASE IN PRICES OVER
TIME. AGAIN, THESE ARE NATIONAL
FIGURES. THE GLOBAL MARKET IS
OBVIOUSLY DIFFERENT BUT NOT
UNAFFECTED. ON A NATIONAL
SCALE, THEY WERE EXPECTING
SALES OF EXISTING HOMES TO
REDUCE SOMEWHAT, BUT CLEARLY,
THE PRICE EFFECTS WERE GOING TO
SWAMP THE VOLUME EFFECTS, IF
YOU WILL. AGAIN, THE REAL
ESTATE TAXES ARE BASED ON THE
TRANSACTION, THE TOTAL
TRANSACTION, WHICH IS ACTUALLY
THE PRICE TIMES MONEY. BOTH OF
THESE ARE KEY INPUTS. WHEN WE
LAST VISITED YOU IN AUGUST,
THIS PART WAS A LITTLE STRANGE.
WE WERE A LITTLE WORRIED ABOUT
IT THAN. THEY ARE ACTUALLY
SHOWING AN INCREASE IN PRICES,
HOUSE PRICES, RELATIVE TO
THEIR FORECAST BACK IN MARCH.
THE JULY FORECAST SHOWED
FURTHER INCREASES IN PRICES.
SOME OF THAT WAS THE ACTUAL
DATA HAD OUTPACED THEIR
FORECASTS. INSTRUCT US AS
SOMEWHAT UNUSUAL. AN UNUSUAL
BIT OF VOLATILITY, A NOTABLE
INCREASE IN A RELATIVELY SHORT
PERIOD. THEY WERE SHOWING A
SOMEWHAT MORE MODEST FORECAST
OF VOLUME SALES . THEY BROUGHT
THAT DOWN SLIGHTLY. AGAIN, THE
TAX BASE PRICE TIMES QUANTITY
IS THE COMBINATION AND THE
PRICE EFFECT WAS SLUMPING THE
VOLUME EFFECT , THE QUANTITY OF
HOMES BEING SOLD. SO WE
ACTUALLY, YOU WILL SEE IN A
MOMENT, WE HAD THE WHIPSAW
EFFECT. WE ACTUALLY INCREASED
THE FORECAST FOR AUGUST BASED
ON THESE NUMBERS, IN NO SMALL
PART . WE EXPECTED TO SEE THEM
SLOW AT A GLOBAL LEVEL BUT NOT
ENTIRELY. THE MOST RECENT
FORECAST IS A BIG CHANGE. THEY
ARE NOW ANTICIPATING A FALL IN
PRICES. HAVING PROJECTED THAT
PRICES WOULD BE INCREASING OVER
2023 AND 2024, THEY ARE NOW
PROJECTING THE PRICES WILL
FALL. NOTABLY, YOU WILL SEE THE
FED IS STILL PREDICTING PRICES
, WELL, WE WOULD JUST LEAVE IT
AT THAT, FALL IN 2023 AND 2024
AND A MODEST RECOVERY AFTER
THAT. MORE DRAMATIC, NOW
HAVING A BIGGER EFFECT ON OUR
REVENUE FORECAST, IS THE
DECLINE IN SALES VOLUME. THIS
IS SIGNIFICANTLY DIFFERENT.
BOTH OF THESE ARE DRIVEN BY
INTEREST RATES, VOLUME IN
PARTICULAR. WITH HIGH INTEREST
RATES AND THE EXPECTATION THAT
INTEREST RATES WILL COME DOWN,
FOLKS WHO ARE IN THE HOUSE
MARKET, YOU KNOW, HAVE
INCENTIVES TO HOLD OUT FOR A
LITTLE BIT HERE. THEY ARE
WAITING FOR INTEREST RATES TO
COME BACK DOWN SOME. THE
FORECAST IS TO DRAMATICALLY
DECLINE THE NUMBER OF HOMES
SOLD AND A MODEST DECLINE IN
PRICES. THOSE RECOVER
RELATIVELY QUICKLY AND, AGAIN,
IN TERMS OF RECOVERY AND SALES
PRICE, IT IS TIED TO THE
EXPECTTION THAT THE FED WILL
BRING DOWN RATES AGAIN IN
PERIOD OF MID-2024 AND IN 2025.
THIS WHIPSAW, WHERE WE WENT
WHERE THE PRICES WENT UP AND
IMPROVED IN AUGUST AND NOW HAS
DETERIORATED IN OCTOBER,
AGAIN, BEATING OUR CURRENT
FORECAST LED TO THAT WHIPSAW,
WHERE WE RAISED OUR FORECAST
INITIALLY IN AUGUST AND NOW
HAVE BROUGHT IT BACK DOWN.
AGAIN, THE FOCUS HERE IS ON
THE RESIDENTIAL SIDE, BUT THE
SAME EFFECTS ARE POTENTIALLY
PLAYING OUT ON THE COMMERCIAL
SIDE. THE COST OF BORROWING
MONEY, THE COST TO MAKE A
MAJOR CAPITAL PURCHASE, LIKE
REAL ESTATE, GOING UP WITH THE
INTEREST RATES. THE "WALL
STREET JOURNAL" JUST THIS WEEK
SPECULATED , FORECASTING THAT
WE COULD SEE SIGNIFICANT
CORRECTION IN THE PRICE OF
BUILDINGS BECAUSE OF LOWER
DEMAND BECAUSE OF THESE
INTEREST RATES. THOSE
PURCHASES TEND TO BE HIGHLY
LEVERAGED AND DEPEND ON A LOT
OF BORROWING SO THEY ARE
PROJECT LEASE SENSITIVE TO
INTEREST RATES. THAT IS WHAT IS
DRIVING THAT CHANGE IN
FORECAST. THERE ARE FOLKS WHO
ARE EVEN MORE PESSIMISTIC THAN
THIS. WE WILL OBVIOUSLY
CONTINUE TO MONITOR REET VERY
CLOSELY. YOU WILL SEE THIS IN
THE NEXT PRESENTATION, REET IS
ONE OF THE MOST REVENUE SOURCES
THAT ARE MOST VOLATILE AND
DIFFCULT TO PREDICT ON THE
MODELING SIDE AND WE ARE
CONTINUING TO WORK ON IT. JUST
TO BE CANDID ON THAT.
>> I'M SORRY, DIRECTOR, CAN YOU
REPEAT THAT. YOU HAVE HAD A
PATTERN OF UNDER FORECASTING
REET?
>> TYPICALLY , YES, BY AS MUCH
AS 10% OR 50%. WE PREDICTED IT
WOULD BE 90 MILLION AND IT
TURNS OUT TO BE 100 MILLION. I
WILL GET TO SOME OF THIS IN THE
NEXT PRESENTATION. PART OF
THIS, A DISPROPORTIONATE SHARE
OF EXCISE STATE REVENUES ARE
IN THE LATE PART OF THE YEAR.
AS WE ARE SITTING HERE TALKING
TO YOU, WE DON'T HAVE A GOOD
IDEA OF WHAT THE FINAL NUMBERS
WILL BE THIS YEAR. THERE ARE A
VARIETY OF EFFECTS GOING ON. A
PATTERN OF UNDER FORECASTING
COULD OFFER SOME HOPE. AGAIN,
IN THIS CASE, WE PURPOSELY
TRIED NOT TO BE PESSIMISTIC,
EVEN WITH THE CORRECTION YOU
SEE ON THE PAGE, WHICH, AGAIN ,
WAS ESSENTIALLY 25 MILLION A
YEAR FOR ABOUT 2023 AND 2024.
THOSE ARE SIGNIFICANT
REDUCTIONS. WITH THAT, I WILL
SPEND SOME TIME TALKING ABOUT
THE JUMPSTART PAYROLL TAX. I
WILL GET TO THE BOTTOM LINE IN
THE WALK-THROUGH. WE ARE NOT
CHANGING THE FORECAST NOW FOR
EITHER 2022, 2023 OR 2024. WE
HAD SIGNIFICANT CONCERNS THE
FORECAST WOULD NEED TO BE
BROUGHT DOWN BUT WHAT WE DON'T
HAVE FOR YOU NOW IS ENOUGH
QUANTITATIVE INFORMATION TO
MAKE IT ANY KIND OF OR FORECAST
ABOUT THAT. LET ME TAKE SOME
TIME TO EXPLAIN WHY AND ALSO
PROVIDE YOU SOME BACKGROUND.
SO, IF YOU RECALL THAT AS OF
RIGHT NOW, PAYMENTS FOR 2021
TOTAL $292 MILLION. THAT IS
ACTUALLY UP A LITTLE BIT SINCE
AUGUST BECAUSE WE GOT MORE LATE
PAYMENTS. WE CURRENTLY ONLY
HAVE IN HAND PAYMENTS FOR
ESSENTIALLY THE FIRST TWO
QUARTERS. THOSE NUMBERS TOTAL
ABOUT $160 MILLION. PAYMENTS
FOR THE THIRD QUARTER ARE
EFFECTIVELY IN THE MAIL. IT
SEEMS ODD TO SAY BUT THAT IS
LITERALLY THE CASE. THEY ARE
DUE AT THE END OF OCTOBER.
ENVELOPES ARE ARRIVING THIS
WEEK AND POTENTIALLY INTO NEXT
WITH PEOPLE STILL MAILING
CHECKS. WE DO NOT HAVE
THIRD-QUARTER RESULTS. EVEN IF
WE DID, THE QUARTERLY PAYMENTS
WE HAVE BEEN RECEIVING OUR
ESTIMATED PAYMENTS . IF YOU
HAVE EVER BEEN SELF-EMPLOYED,
WHEN YOU DO YOUR INCOME TAXES,
YOU MAKE ESTIMATED PAYMENTS
EACH QUARTER TO THE IRS. THESE
PAYMENTS ARE NOT FIRM
ESTIMATES OF EVERYONE'S
OBLIGATIONS. IN FACT, FIRMS
DON'T KNOW WHAT THEIR FULL
OBLIGATIONS WILL BE UNTIL THE
END OF THE YEAR BECAUSE THE
TAXES ON ANNUAL COMPENSATION,
THE ANNUAL PAYROLL. WE WILL NO
, WE WILL HAVE AN IDEA WHAT
THOSE THIRD-QUARTER PAYMENTS
ARE IN ABOUT 7 TO 10 DAYS. WE
WILL BE ABLE TO SHARE THAT
INFORMATION BUT IT IS NOT
GOING TO BE DETERMINATIVE OF
WHERE THINGS ARE GOING. IT
WILL REALLY BE THOSE
FOURTH-QUARTER PAYMENTS, THE
ANNUAL TRUE UP, THOSE WILL BE
RECEIVED AT THE END OF JANUARY
OR MID FEBRUARY. AT THIS POINT,
WE DON'T HAVE THE BASIS. WE
ONLY HAVE THE INFORMATION WE
HAVE SO FAR FOR THE ACTUAL
EMPIRICAL NUMBERS, WE ARE SOON
TO SEE THE THIRD QUARTER BUT WE
DON'T HAVE ENOUGH CONFIDENCE
THAT WILL TELL US ENOUGH. AT
THIS STAGE, WE HAVE LOTS OF
REASONS TO THINK THAT THE
FORECAST IS HIGH , RELATIVE TO
WHAT THE ACTUALS WILL BE. IN
PARTICULAR, WE ARE SEEING
EARNINGS REPORTS COME IN TO THE
TECH SECTOR THAT ARE FALLING
SHORT OF EXPECTATIONS. THAT IS
HAVING AN IMPACT ON STOCK
VALUES. STOCK VALUES AFFECT
COMPENSATION. THAT HAS A RIPPLE
EFFECT YOU CAN SEE DIRECTLY. WE
ARE ALSO SEEING LAYOFFS IN THE
TECH CENTER, CERTAINLY, HIRING
IS SLOWING. WE HAVE SEEN SOME
FURTHER INCREASE IN OVERALL
EMPLYMENT IN THAT PARTICULAR
SECTOR. THOSE ARE FACTORS THAT
ARE LIKELY TO BRING DOWN ACTUAL
REVENUES BUT WE DON'T HAVE ANY
QUANTITATIVE INFORMATION, ANY
MORE THAN WE HAD IN AUGUST. WE
ARE NOT REVISING THE FORECAST.
WE ARE SUGGESTING TO YOU THAT
YOU SHOULD RECOGNIZE THERE IS A
HIGH RISK THAT WE COULD MISS
THOSE PROJECTIONS AND WE WILL
BRING YOU REVISED FIGURES IN
APRIL AND WE WILL KEEP YOU
POSTED AS WE GO. I DON'T THINK
WE WILL HAVE A MEANINGFUL SENSE
OF ANY OF THIS UNTIL MID
FEBRUARY. THIS HIGH-LEVEL
HIGHLIGHTS THE CHALLENGE. YOU
WILL SEE IN THE NEXT
PRESENTATION, WE HAVE A LOT OF
HISTORY, DECADES . WE
UNDERSTAND AND WE CAN SEE HOW
CHANGES IN EMPLOYMENT AND
CHANGES IN INFLATION, ALL OF
THOSE THINGS ARE AFFECTING
VARIOUS REVENUE STREAMS. WE
HAVE SIMPLY NO HISTORY WITH THE
PAYROLL TAX. WE HAVE YEARS
WORTH OF DATA AND QUARTERS
WORTH OF PAYMENTS BUT WE REALLY
DON'T KNOW WELL. THERE IS
REASON TO THINK AND WE EXPECTED
TO BE MORE VOLATILE THAN THE
OTHER REVENUE STREAMS, WHICH,
EVEN AS THE ECONOMY MOVES, WE
DON'T GET HUGE SWINGS. THE
PAYROLL EXPENSE TAX IS PAID , A
LARGE SIGNIFICANT SHARE OF IT
COMES FROM ONE OR TWO SECTORS ,
A DISPROPORTIONATE SHARE FROM
SOME OF THOSE LARGER
EMPLOYERS, NOT NEARLY AS
DIVERSIFIED AS A REVENUE SOURCE
AS THE SALES TAX AS WE KNOW.
IN DOLLAR TERMS, IT IS NOT THAT
FAR OFF. THE FORECAST, THE
ACTUALS FOR 2021 ALMOST $300
MILLION. SALES WILL BE CLOSER
TO $350 MILLION. THAT IS NOT
THAT MUCH OF A DIFFERENCE. IT
IS A COMPARABLE REVENUE STREAM
BUT EVERY EXPECTATION THAT IT
WILL BE MORE VOLATILE GOING
FORWARD. THAT IS WHY WE DON'T
HAVE ANOTHER REVISED UPDATE
FOR YOU ON THE PAYROLL EXPENSE
TAX BUT YOU WILL ALSO NEED TO
HEAR OUR CONCERN AND AT A
STAFF LEVEL WE WILL KEEP YOU
ALL UPDATED ON WHAT WE SEE IN
THE THIRD QUARTER BUT I DON'T
THINK WE WILL HAVE SOMETHING
JUST DEFINITIVE TO DELIVER TO
YOU UNTIL THE APRIL UPDATE AND
CERTAINLY NOT UNTIL WE HAVE
SEEN THE FINAL NUMBERS FOR MAY
2022, WHICH WILL BE, AGAIN,
PROBABLY ABOUT THE SECOND OR
THIRD WEEK OF FEBRUARY. I SEE
THERE IS A HAND UP.
>> IT WAS ME, THANKS, DIRECTOR
NOBLE , YOU JUST ANSWERED IT.
IT WAS ABOUT TIMING OF REVISED
FIGURES. YOU JUST ANSWERED AT.
THANK YOU.
>> WE WILL KNOW ABSOLUTELY
ABOUT 2022 BY MID FEBRUARY.
BY THE END OF FEBRUARY WE WILL
GET THE FULL RESULTS FOR ALL
2022 REVENUE AND WE WILL HAVE A
SENSE OF HOW BOTH PAYROLL
EXPENSE TAX AND OTHER REVENUES
HAVE COME IN AND IF THERE IS
ANY HOPE OF MITIGATING
SHORTFALLS WITH THIS AND
OTHERS AT THAT IS THE WAY THESE
PLAY OUT. THAT FIRM 2022 NUMBER
WILL THEN GIVE US A MUCH MORE
FIRM BASIS FOR LOOKING AT 2023
AND 2024. WE WILL HAVE
DEVELOPED OUR FIRST YEAR OF
QUARTERLY DATA. OVER TIME, WHAT
WE ARE HOPING TO UNDERSTAND IS
A PATTERN QUARTER TO QUARTER
SO WE HAVE A WAY OF SAYING, WE
ARE SEEING THIS IN THE SECOND
QUARTER, WE CAN EXPECT TO SEE
THIS IN THE THIRD OF THE
FOURTH. CURRENTLY, WE DON'T
HAVE THE TRACK RECORD SO WE
DON'T KNOW THAT. THAT IS THE
STORY ON JUMPSTART AND WHY WE
DON'T SEE AN UPDATE IN THAT
REVENUE STREAM. THAT IS THE
CONCLUSION OF OUR PRESENTATION.
WE WELCOME ANY QUESTIONS. I
CAN BACKUP IF THERE ARE ANY
SLIGHTS IN PARTICULAR.
>> THANK YOU VERY MUCH,
DIRECTOR NOBLE AND THANK YOU
TO YOUR TEAM, AS WELL. IT IS
NEVER FUN BEING THE BEARER OF
BAD NEWS AND THIS IS DEFINITELY
BAD NEWS IS WE SEEK TO WRAP
APART BUDGET DELIBERATIONS IN
THE NEXT FEW WEEKS. COLLIES, I
WILL TURN IT OVER TO OUR
FORECAST COUNCIL COLLEAGUES TO
SEE IF THERE ARE ADDITIONAL
QUESTIONS YOU WOULD LIKE TO
ASK. I WOULD LIKE TO FOLLOW UP
ON DIRECTOR DINGLEY'S ORIGINAL
QUESTION, AS WELL. IF YOU DON'T
MIND GOING BACK TO THE REET
FORECAST NARRATIVE, THAT WANT.
ALL RIGHT. THANK YOU SO MUCH.
I RECOGNIZE THAT THE FEDERAL
GOVERNMENT IS TRYING TO DO IS
MUCH AS THEY CAN TO PREVENT
AGAINST THE PENDING OR
POSSIBILITY OF COMING
RECESSION BY INCREASING
INFLATION BUT, AS YOU ARE
NOTING HERE, THAT INCREASE IN
INFLATION OR RATES, INTEREST
RATES, IS CAUSING THE MARKET TO
SLOW DRAMATICALLY AND DECREASE
TO $64 MILLION TO THE REET
REVENUE FUNDS TO SEATTLE
DIRECTLY HAS AN IMPACT TO
INVEST IN CAPITAL PROJECTS,
SPECIFICALLY TRANSPORTATION
PROJECTS AND HISTORICAL
PROJECTS WHERE WE HAVE
TYPICALLY USED REET UNDIE. TO
DIRECTOR JIK DINGLEY'S
QUESTION, IS THERE ANYWAY WE
CAN HELP INCREASE THE ABILITY
TO GET CONFIDENCE IN THE
HOUSING MARKET TO CONTINUE TO
INVEST IN BUILDING LOCALLY IN
THE REGION AND TO SPUR ECONOMIC
ACTIVITY IN REACTION TO OR TO
WARD OFF THESE PROJECTIONS?
>> YEAH, I THINK THE BIGGEST
THING TO RECOGNIZE IN THE END,
HOUSING DEMAND IS ALL, MIND
YOU, IT IS ALL ABOUT EMPLOYMENT
AND JOB OPPORTUNITIES. TO THE
EXTENT THAT, YOU KNOW, OUR
REGIONAL ECONOMY DOES BETTER IN
RELATIVE TERMS ON EMPLOYMENT
GROWTH, THAT WILL BE THE KEY.
THAT IS WHAT IS DRIVING THE JOB
OPPORTUNITIES THAT MOTIVATE
FOLKS TO MOVE TO THE AREA, TO
BUY HOMES AND SO WANT. IT IS
REALLY ALL ABOUT THE GROWTH OF
THE ECONOMY OVERALL WITHIN THE
REGION. IN TERMS OF
CONSTRUCTION ACTIVITY, YOU KNOW
RATHER THAN SALES, IT IS MORE
THE ACTION ON HOUSING, THE
VOLUME GOING OUT . AGAIN, THE
DEMAND HERE REMAINS STRONG.
NOT ONLY HAVE WE BEEN CREATING
JOBS , WE HAVE BEEN CREATING
JOBS THAT PAY RELATIVELY WELL.
THE AFFORDABILITY OF HOUSING,
I THINK IT IS REALLY ABOUT
OVERALL ECONOMIC GROWTH. LET ME
JUST SAY ONE MORE THING. I
THINK IT IS WORTH HIGHLIGHTING.
THE FEDERAL RESERVE STRATEGY
IS UNDERSTOOD. IT IS
SHORT-TERM PAIN FOR LONG TERM
BENEFIT TO BRING DOWN
INFLATION. THAT PAIN IS VERY
REAL. IT WILL AFFECT DIFFERENT
FOLKS IN DIFFERENT WAYS. FOLKS
WHO HAVE DEBT, PRACTICALLY
CREDIT CARD DEBT , A VARIABLE
RATE, THEY WILL SEE
SUBSTANTIALLY HIGHER COSTS .
FIXED COSTS, REALLY, THOSE WHO
ARE SITTING ON ASSETS WILL DO
BETTER IN THAT ENVIRONMENT.
THERE ARE WINNERS AND LOSERS IN
THOSE SCENARIOS. I DON'T KNOW
ENOUGH ABOUT THAT, AS WELL. I
WAS A YOUNG PERSON BUT LIVED
THROUGH THE RECESSION OF THE
EARLY 1980s, WHICH WAS
TRIGGERED IN EXACTLY THIS WAY,
THE FEDERAL RESERVE DECIDED TO
RAISE RATES AND INFLATION ROSE
CONSIDERABLY. HOME MORTGAGE
RATES WENT UP . THERE WAS A
FOUND RECESSION AND JOB LOSS
ASSOCIATED WITH THE INTEREST
RATES. THERE WAS REAL ECONOMIC
PAIN.
>> THANK YOU, DIRECTOR NOBLE .
I'M STRUCK BY THE SORT OF
BALANCE WE ARE TRYING TO
ACCOMPLISH WITH THE JUMPSTART
PROGRESSIVE REVENUE, RESOURCES
AT OUR FINGERTIPS, THE VAST
MAJORITY GOING TO BUILDING
HOUSING AND THE VAST MAJORITY
OF THOSE DOLLARS GOING TO
MULTIFAMILY STRUCTURES, YOU
KNOW, LARGER APARTMENT AND
RENTAL UNITS THAT WILL HELP
FAMILIES BE ABLE TO CONTINUE TO
LIVE IN THE CITY BUT WE ARE
ALSO TRYING TO BALANCE THE
INVESTMENT WITH MAKING SURE
THERE IS ENOUGH SUPPORTIVE
SERVICES THAT THE PERSONNEL WAS
ALSO BEING INVESTED IN. IT
SOUNDS LIKE ONE POSSIBLE, NOT
FULL INDIGO, BUT ONE WAY TO TRY
TO CONTINUE TO PUSH US IN THE
RIGHT DIRECTION IS TO INVEST IN
THE CAPITAL INTER-STRUCTURE,
WHERE POSSIBLE, TO ENSURE THOSE
CONSTRUCTION PROJECTS MOVE
FORWARD AND THAT WE CONTINUE
TO BUILD WHERE WE HAVE
ADDITIONAL OTHER RESOURCES,
LIKE TO JUMPSTART, WITH THE
TAKEAWAY THAT IS FAIR? THAT A
>> ABSOLUTELY. I THINK ONE OF
THE CLASSIC THINGS THAT HAPPEN
IN A RECESSION OF ANY KIND IN
THE CONTEXT OF HOUSING IS A
GOOD EXAMPLE. IF A CITY'S
HOUSING LEVY IS GENERATING
SIGNIFICANT REVENUES, IN SOME
WAYS, IT IS A PROPERTY TAX
REVENUE THAT IS NOT IDEAL BUT
IF YOU LOOK BACK AT THE
FORECAST, THE PROPERTY TAX
FORECAST DOESN'T CHANGE. THE
RESOURCES BEING PROVIDED BY
THE HOUSING LEVY WILL BE STRONG
AND STEADY. OTHERS MAY BE
BACKING OFF BECAUSE THE
INTEREST RATES ARE TOO HIGH, WE
WILL HAVE THE RESOURCES TO
CONTINUE TO BUILD THROUGH THE
RECESSION AND , OFTEN
GOVERNMENT IS A COUNTERCYCLICAL
INVESTOR. AS OTHERS ARE
BACKING UP, WE CAN CONTINUE TO
BUILD. AGAIN, THE REET REVENUE
WILL CHALLENGE US ON THAT
FRONT. THAT IS, I THINK, REAL
POSSIBILITY. THE SAME IS TRUE
THE TRANSPORTATION LEVY IN THE
LIGHT LIKE . SIGNIFICANT
RESOURCES WON'T BE AFFECTED BY
THIS NEAR-TERM DOWNTURN AND
WE CAN BECOME A HEALTHY
ECONOMIC DRIVER, IF YOU WILL.
>> THANK YOU SO MUCH. EXCUSE
ME. THERE WE GO. DIRECTOR
DINGLEY, PLEASE GO AHEAD.
>> THANK YOU. I AM INCREDIBLY
>>> BY HOW DISPROPORTIONATE
THE IMPACT IS OF THESE FED
ACTIONS ON INTEREST RATES AND
WHAT THAT DOES . IF YOU HAVE
CASH, YOU ARE RELATIVELY
UNAFFECTED. IF YOU HAVE THAT
WEALTH ALREADY AND ACCESS TO
IT, IT MAKES IT MORE
INCONVENIENT . IF YOU DON'T
HAVE IT, TAKES YOU OUT OF THE
BALLGAME ENTIRELY. I AM
WONDERING, DIRECTOR NOBLE , I
THINK YOU ALLUDED TO THIS, I
THINK I HEARD YOU SAY, HAS THE
FED ACKNOWLEDGED THAT
DISPARATE IMPACT THIS ACTION IS
CAUSING AND HAVE WE HEARD OF
ANY PLANS THAT WOULD COME FROM
THE FEDERAL GOVERNMENT TO
PROVIDE SUPPORT FOR THOSE
DISPROPORTIONATELY IMPACTED
MORE THAN OTHERS?
>> I DON'T FEEL LIKE I AM
QUALIFY. I DON'T WANT TO PUT
THE FED UNDER THE BUS. I
HAVEN'T SEEN ANYTHING BUT THAT
DOESN'T MEAN THEY HAVEN'T
THOUGHT THIS WAY. SO SOME OF
THE OTHER MEASURES THAT HAVE
BEEN TAKEN, FOR INSTANCE,
STUDENT LOAN FORGIVENESS, IS
CERTAINLY SOMETHING FOLKS IN
DEBT ARE FACING ESCALATING
PAYMENTS, ESPECIALLY THOSE
WITH FLEXIBLE RATES. SO, THAT
IS AN EXAMPLE OF WHAT COULD BE
DONE IF THEY WERE MOTIVATED.
WE COULD DO MORE RESEARCH AND
GIVE YOU A BETTER SENSE OF
THAT.
>> THANK YOU.
>> ONE ADDITIONAL QUESTION I
HAVE IS THAT THIS IS A
RELATIVELY NEW OFFICE. WE
APPRECIATE ALL THE WORK YOU
HAVE DONE IN THIS TIME,
SPECIFICALLY. WE KNOW THERE ARE
SIMILARLY SITUATED OFFICES IN
AT LEAST WASHINGTON STATE, KING
COUNTY AND ALSO AT THE [ BLEEP
] DEPARTMENT IN THE STATE
LEGISLATURE. ARE THERE OTHER
JURISDICTIONS THAT HAVE A
SIMILARLY SITUATION THAT YOU
HAVE BEEN ABLE TO REACH OUT TO
AND TAKE THE TEMPERATURE TO SEE
IF THEY ARE SUMMARILY
EXPERIENCING THIS TYPE OF
DECREASE IN THE REVENUE
AVAILABLE TO THEIR CITIES? WE
CLEARLY HAVE THE MOST
REGRESSIVE TAX SYSTEM IN THE
ENTIRE COUNTRY IN WASHINGTON
STATE AND WE ARE TRYING TO WORK
TOWARDS A MORE PROGRESSIVE
REVENUE, AND LARGE START, A
JUMPSTART BUT WE WILL CONSIDER
OTHER PROGRESSIVE REVENUE
STREAMS THROUGH THE PROGRESSIVE
REVENUE TAX FORCE THAT YOU
STARTED MEETING LAST MONTH.
THERE IS CONVERSATIONS THAT ARE
HAPPENING TO TRY TO TURN OUR
UPSIDE DOWN REVENUE STREAMS
RIGHT SIDE UP, BUT HAVE YOU HAD
A CONVERSATION WITH OTHER
JURISDICTIONS THAT ARE
EXPERIENCING THIS SIMILAR
LEVEL OF PAIN YOU ARE TALKING
ABOUT OR ARE WE UNIQUELY
POSITIONED, GIVEN OUR
AGGRESSIVE STRUCTURE IN
WASHINGTON STATE?
>> I WILL ANSWER IF YOU GIVE ME
THE CHANCE TO PLUG, THE FEDS
ACTUALLY CONNECTED WITH THE
FOLKS AT KING COUNTY, THE CITY
EMPLOYEES. ALSO, A TEAM OF
FOLKS AT WESTERN WASHINGTON
UNIVERSITY, BELLINGHAM, WHO DO
REGIONAL FORECASTING FOR AREAS
TO THE NORTH, AS WELL IS
ACTUALLY THE PUGET SOUND AREA,
AS WELL. TRYING TO DEVELOP SOME
OF THOSE RELATIONSHIPS, THEY
ALL RUN COMPARABLE MODELS. KING
COUNTY IS PROBABLY OUR CLOSEST
ANALOG. A LOT OF THEIR REVENUE
IS FROM UNINCORPORATED AREAS
OF THE COUNTY. WE HAVE BEEN IN
TOUCH WITH THEM OVERALL. THE
FORECAST WE HAVE JUST BEEN
PUTTING TOGETHER IN THE LAST
COUPLE WEEKS, WE HAVEN'T HAD A
CHANCE TO CHECK IN ON THOSE. WE
DO REGULARLY MONITOR THE STATE
FORECAST COUNCILS. WE JUST SAW
THEIR UPDATED FORECAST, YEAH,
THEY HAVE NOT DONE A REVENUE
UPDATE RECENTLY. THE COUNTY'S
LAST REVENUE UPDATE WAS
ACTUALLY BEFORE THIS MOST
RECENT DOWNTURN IN THE
FORECAST. WE EXPECT TO SEE
FROM THEM STUFF IN THE FUTURE
THAT IS CLOSER TO THIS. THEY
WERE POTENTIALLY HIT HARDER,
ACTUALLY ON THE REAL ESTATE
EXCISE TAX SIDE BECAUSE THEY
ARE COLLECTING REVENUES FROM
UNINCORPORATED AREAS, WHICH
TEND TO BE RESIDENTIAL. THOSE
ARE RELATIONSHIPS WE HAVE
ESTABLISHED AND ARE
MAINTAINING ON AN ONGOING BASIS
FOR THE REASONS YOU DESCRIBED,
FOR THE POTENTIAL INSIGHTS TO
BE GATHERED FROM THEM, AS WELL.
>> OTHER QUESTIONS? OKAY. I
KNOW THAT THE STATE REVENUE
FORECAST TEAM IS ON A
DIFFERENT TIMELINE . THEY WILL
OBVIOUSLY GET THEIR UPDATES, I
BELIEVE, MAYBE NOVEMBER OR
DECEMBER. THAT WILL HELP INFORM
THE GOVERNOR'S PROPOSED BUDGET
GOING INTO THE NEXT LEGISLATIVE
SESSION. DO YOU HAVE ANY
INDICATION FROM THE STATE
PARTNERS, AS WELL, THEY ARE
SEEING THIS TYPE OF DECLINE IN
THEIR AVAILABLE REVENUE FOR
NEXT YEAR OR THEIR BIANNUAL
BUDGETING PROCESS?
>> WHAT WE HAVE SEEN IS THERE
ECONOMIC FORECAST WHICH, AGAIN,
ARE DETERIORATING, IF YOU WILL.
I HAVEN'T SEEN ANY RIPPLE INTO
SUBSTANTIALLY THE REVENUE SIDE
BUT AGAIN, WE HAVEN'T BASED ANY
CORRECTIONS UNTIL THIS
FORECAST OURSELVES. OR IT WAS
LARGELY EXPECTED BEFORE THE
LAST COUPLE MONTHS, A SLOW BUT
MODEST GROWTH. IT WILL BE
INTERESTING TO SEE HOW ONE
DIGESTS WITH THE GROWING
CONSENSUS FROM A SLOWDOWN WHEN
IT IS TECHNICALLY A RECESSION
BUT IN AN INTEREST RATE DRIVEN
SLOW DOWN. YOU KNOW, THE STATE
HAS A BROADER BASE OVERALL.
PERCENTAGE EFFECTS MAY BE
SMALLER BUT WE WILL BE TRACKING
TO SEE WHERE THEY END UP.
>> THANK YOU. WE ARE OBVIOUSLY
INTERESTED IN THE IMPACT OF
THE REET FORECAST WHEN YOU GET
THOSE UPDATES. PLEASE GO AHEAD
, DIRECTOR CARNELL.
>> I APPRECIATE ALL OF THIS AND
I UNDERSTAND EVERYONE'S
UNDERSTANDING AND THE HUMAN
SIDE OF ALL OF THIS. IT IS ,
HAVING WORKED FOR THE CITY FOR
20 YEARS, MY STARTED DURING THE
1990s RECESSION AND I WAS VERY
HAPPY THE CITY GAVE ME THE
OPPORTUNITY TO HAVE A JOB. I
HOPE AS WE ARE RECOGNIZING WHAT
IS HAPPENING IN AND AROUND OUR
CITY, WE CAN ALSO BUT ONLY DO
THINGS AROUND AFFORDABLE
HOUSING, CAPITAL IMPROVEMENT
AND HELPING THOSE THAT MAY BE
LOSING JOBS, AS WELL. I DO WANT
TO ASK, DO WE HAVE ANY IDEA HOW
MUCH MORE WE EXPECT A DECLINE?
IT IS SUCH A SIGNIFICANT
REVENUE SOURCE FOR US,
RECOGNIZING A VERY REGRESSIVE
MUCH FURTHER THIS COULD HOW
POSSIBLY GO, BEYOND EVEN WHAT A
PESSIMISTIC OUTLOOK LOOKS LIKE?
>> I MEAN, WE ARE PREDICTING
ABOUT 68 MILLION. IT COULD
EASILY DROP BY ANOTHER 10 OR 15
MILLION BEYOND THAT. DAVID
HENNES MIGHT BE ABLE TO HELP
HERE, TOO. IN THE GREAT
RECESSION, WHICH IS NOT THE
BEST ANALOG, THE GREAT
DEPRESSION WAS -- GREAT
RECESSION WAS A FINANCIAL
MARKET CRISIS. THEY DROPPED
60, 70%, HUGE DECLINE. FOR A
COUPLE YEARS. THAT IS A VERY
DIFFERENT SCENARIO. IT WAS
KIND OF WEIRD WHERE THINGS WERE
BEFORE. THAT WAS DURING THE
FINANCIAL CRISIS BUT ONE OF THE
THINGS, THIS IS A CHALLENGE
TO INTEGRATE. IN TERMS OF
STRUCTURING THE BUDGET, THERE
ARE A SET OF FINANCIAL POLICIES
AROUND THE USE OF AND
PRACTICALLY HOW MUCH REET
REVENUE CAN BE USED FOR DEBT
SERVICE PAYMENTS. WILL WE DID
THAT, WE THOUGHT IT WOULD BE
GOOD FOR DEBTS I INTERN, WE
ASSIGNED A CERTAIN SHARE OF
DEBTS TO BE PAID FROM REAL
ESTATE EXCISE TAX. THE THING
ABOUT THIS, IT IS LIKE YOUR
MORTGAGE. YOU HAVE TO MAKE THAT
PAYMENT, NO MATTER WHAT. AS
REVENUES DECLINED, THE
DISCRETIONARY AMOUNT TO INVEST
IN NEW CAPITAL PROJECTS, THEY
WERE GOOD INVESTMENTS. WE ARE
NOT DONE PAYING FOR THEM. THAT
IS ONE OF THE PARTICULAR
CHALLENGES , WE WILL SQUEEZE
OURSELVES IN TERMS OF
DISCRETIONARY SPENDING. AGAIN,
A LOT OF WHAT WE GET TO SPEND
MONEY ON ARE NOT THE VISIBLE
THINGS. THERE WAS A DAY OF
ALL-DAY KINDERGARTEN OUTSIDE. I
SIGNED UP FOR PLAYGROUND
RENOVATION AND COMFORT STATION
RENOVATION. THE LATTER OF WHICH
WAS TO BE FUNDED THROUGH REET,
PERHAPS NOT THE MOST VISIBLE
THING BUT THAT HAD TO DO WITH
A.D.A. ACCESS AND IMPROVEMENTS,
AS WELL. THOSE VERY SIMPLE KID
OF NOT VISIBLE THINGS ARE
IMPORTANT. THOSE OF THE KINDS
OF THINGS WE WILL LIKELY HAVE
TO POSTPONE AND WE ARE LOOKING
OUT TO POSSIBLY CANCEL THOSE
FOR THE NEAR-ERM. AGAIN, REAL
EFFECTS EVERYWHERE.
>> THANK YOU.
>> THANK YOU ALL. I WILL JUST
USES AS AN OPPORTUNITY TO
MENTION HOW IT WILL AFFECT OUR
BUDGET DELIBERATIONS. YOU
MENTIONED THE WORD POSTPONE.
GIVEN TODAY FOR NEWS, WE ARE
GOING TO BE POSTPONING THE
RELEASE OF THE CITY COUNCIL'S
BALANCING PACKAGE FOR ITS
INITIAL ROUND OF CONSIDERATION
BY COUNCILMEMBERS AND MEMBERS
OF THE COMMUNITY BY ONE WEEK.
ALL OF THE DATES WE HAD
INITIALLY PROPOSED WILL BE
PUSHED OUT BY ONE WEEK TO TRY
TO ACCOMMODATE FOR THIS NEWS WE
ARE RECEIVING TODAY, ESPECIALLY
THE IMPACT OF REET ON OUR
BALANCING PACKAGE AS DIRECTOR
NOBLE JUST MENTIONED. WE USE
REET TRADITIONALLY FOR CAPITAL
INVESTMENTS AND TRANSPORTATION
AND INFRASTRUCTURE. WE ALSO USE
REET FOR CRITICAL INVESTMENTS
THAT MEET HUMAN NEEDS, LIKE
THE COMFORT STATION. THE USE OF
REET IS THROUGHOUT OUR BUDGET.
WE WILL NEED TO TAKE SOME TIME
TO ACCOMMODATE FOR THIS MOST
RECENT FORECAST AND WANT TO BE
INTENTIONAL ABOUT THOSE
DISCUSSIONS. WE GREATLY
APPRECIATE THE COLLABORATION IN
THE FUTURE CONVERSATIONS WILL
HAVE WITH THE CITY BUDGET'S
OFFICE AND THE DEPARTMENTS, AS
WELL, AS WE THINK ABOUT WHAT
POSSIBLE SCENARIOS WE CAN PUT
FORWARD FOR COUNCILMEMBER
CONSIDERATIONS. DIRECTOR NOBLE
, THANK YOU FOR SHARING THIS
INFORMATION. THIS IS WHY WE
WANT TO HAVE THESE DISCUSSIONS
IN REAL TIME AND HAVE REAL
CONVERSATIONS WITH MEMBERS OF
THE PUBLIC, AS WELL, SO THAT
THIS INFORMATION IS SHARED
JOINTLY OUT TO MEMBERS OF THE
COMMITTEE, THE MEDIA AND WITH
OUR COLLEAGUES AT THE SAME
TIME SO WE CAN, TOGETHER,
ADDRESS THESE PRESSING NEEDS.
INSTEAD OF RELEASING THE
PROPOSED INITIAL BALANCING
PACKAGE ON THE SEVENTH, WE WILL
DO THAT THE FOLLOWING WEEK ON
THE 14th. WE WILL THEN HAVE THE
FOLLOWING WEEK ON THE 21st, THE
CHANCE FOR COLLEAGUES TO HAVE
THEIR AMENDMENTS ON THE 21st.
BECAUSE IT IS THANKSGIVING, WE
WILL COME BACK MONDAY THE 28th
AND HAVE THE FINAL COMMITTEE
VOTE AND THEN THE 29th, WHICH
IS A TUESDAY, OUR NORMAL FULL
COUNCIL MEETING AT 2:00 PM WILL
BE THE LAST EPIC I WANT TO
THANK THE COUNCIL PRESIDENT, AS
WELL, WHO WE HAVE BEEN IN
COMMUNICATION WITH REGARDING
THIS NEWS AND HAVE WORKED TO
SEND THE REVISED CALENDAR TO
THE FLOOR DURING THIS
DISCUSSION HERE TODAY, AS WELL.
IT IS NOT GOOD NEWS IN ANY
REGARD. WE ALSO KNOW IT IS THE
BEST ANALYSIS YOU ALL ARE ABLE
TO OFFER US AND IT MAY CHANGE
IN THE FUTURE. WE WILL NEED TO
ALSO ACCOMMODATE THAT IN THE
BUDGET, AS WELL. BUT, THIS IS
NOT A SEATTLE CITY COUNCIL
MEETING. IT IS A REVENUE
FORECAST COUNCIL MEETING. WE
ARE BACK TO HER NORMAL
DELIBERATIONS. THIS IS JUST A
PUBLIC SERVICE ANNOUNCEMENT. A
HUGE APPRECIATION FOR THE
COUNCIL PRESIDENT, CBO AND
REVENUE STAFF. THANK YOU FOR
THIS UPDATED INFORMATION SO WE
CAN BE DELIBERATE ABOUT THOSE
DISCUSSIONS OVER THE NEXT WEEK.
ALL THE PUBLIC COMMENT FOR THE
SEATTLE CITY COUNCIL
DELIBERATIONS WILL REMAIN AS
POSTED AND THERE IS NO CHANGE
TO THAT. OKAY. WE ARE BACK TO
OUR FORECAST COUNCIL
DELIBERATIONS. AS YOU HEARD
FROM DIRECTOR NOBLE , IT IS UP
TO THE PURVIEW OF THIS
FORECAST, THE FORECAST COUNCIL
, TO DECIDE IF WE ACCEPT THE
REVENUE FORECAST AS PRESENTED
BY THE OFFICE OF ECONOMIC
REVENUE AND FORECAST. IF THE
COUNCIL DECIDES TO REJECT THE
FORECAST, WE CAN CHOOSE TO GO
WITH A MORE PESSIMISTIC OR
OPTIMISTIC FORECAST. THIS IS
ITEM NUMBER FOUR ON OUR
AGENDA, WHICH RELATES TO THE
FORECAST COUNCIL DISCUSSION AND
POSSIBLE VOTE REGARDING
ADOPTION OF THE NOVEMBER
FORECAST. AS A REMINDER, IN
TERMS OF APPROVING THE
RECOMMENDED FORECAST WE JUST
HEARD, IF WE CONCUR WITH THE
RECOMMENDATIONS AND THE
FORECAST THAT HAS BEEN
PRESENTED BY DIRECTOR NOBLE ,
THERE IS NO NEED FOR A FORMAL
VOTE BY THE BODY. HOWEVER, IF
THERE IS ANY CONCERN OR THERE
IS DISCUSSION HERE AMONGST THE
FORECAST COUNCIL MEMBERS, WE
BELIEVE IT IS APPROPRIATE TO
TAKE A DIFFERENT APPROACH
AND/OR PERHAPS ADOPT A
DIFFERENT FORECAST SCENARIO,
WE HAVE THAT AUTHORITY. THE
FORECAST COUNCIL OFFICE WAS
PURPOSEFULLY ESTABLISHED AS AN
INDEPENDENT FUNCTION,
INDEPENDENT FROM THE
LEGISLATIVE AND EXECUTIVE
BRANCHES SO IT IS PROTECTED
FROM ANY POLITICAL INFLUENCE OR
PRESSURE TO AMEND OR PRESENT
THE FORECAST AT ANY CERTAIN
WAY. AS REPRESENTATIVES OF THE
FORECAST COUNCIL, BOTH FROM THE
EXECUTIVE AND EXECUTIVE FOLKS
THAT ARE PRESENT HERE TODAY, WE
HAVE DIRECT RESPONSIBILITY, AS
STEWARDS OF THE CITY FINANCES,
TO ENSURE WE HEAR THE
RECOMMENDATIONS AND MOVE
FORWARD AS WE WOULD LIKE.
ACCORDING TO THE ORDINANCE THAT
WAS ESTABLISHED TO CREATE THIS
BODY, TO CREATE THE REVENUE
FORECAST OFFICE AND TO ENSURE
WE HAVE QUARTERLY UPDATES, IT
IS UP TO US IF WE WANT TO
ADOPT THIS FORECAST AS
PRESENTED OR CHOOSE A DIFFERENT
FORECAST. CHOOSING A DIFFERENT
FORECAST WOULD REQUIRE A VOTE.
THAT WOULD REQUIRE AT LEAST
THREE MEMBERS OF OUR FOUR
MEMBER COUNCIL TO APPROVE THE
DIFFERENT SCENARIO. I WILL
PAUSE HERE TO SEE IF THERE ARE
ANY QUESTIONS FOR THE FORECAST
COUNCIL FOR OTHER COLLEAGUES OR
FOR THE PURPOSES OF
DELIBERATION. OKAY. I AM
SEEING SHAKING HAS. GREAT.
DIRECTOR DINGLEY, PLEASE GO
AHEAD.
>> I WILL BE SUPPORTIVE OF THE
OFFICE'S RECOMMENDATION OF THE
BASELINE FORECAST. I DID JUST
WANT TO NOTE THAT BECAUSE WE
ARE GOING TO BE LIVING FORECAST
TO FORECAST AND BECAUSE OF THE
SIGNIFICANT UNCERTAINTY, WE
REALLY HAVE TO, YOU KNOW, THIS
IS SOMETHING YOU KNOW VERY
WELL, WE HAVE TO BE VERY
MINDFUL OF THAT FACT AS WE ARE
COMING TO HOW WOULD OUR
ULTIMATE SPENDING LEVELS GO FOR
2023 EVIAN. THIS IS AN
INCREDIBLY DYNAMIC TIME TO BE
IN THIS BUSINESS. I DO NOT
ENVY DIRECTOR NOBLE OR DAVID
HENNES TRYING TO NOW THE STEM.
I AM APPRECIATIVE OF THE
INFORMATION THEY HAVE BEEN ABLE
TO SHARE. I APPRECIATE YOUR
PARTNERSHIP IN BEING ABLE TO
REACT TO THESE DYNAMIC
CIRCUMSTANCES. THANK YOU.
>> THANK YOU VERY MUCH,
DIRECTOR DINGLEY. LET'S SEE,
ANY ADDITIONAL COMMENTS? I,
TOO, WILL BE SUPPORTIVE OF
ACCEPTING THE RECOMMENDATIONS
AS PRESENTED BY THE FORECAST
COUNCIL OFFICE. I AM NOT
HEARING OBJECTIONS TO THAT.
ACCORDINGLY, I AM GOING TO JUST
REQUEST THE MEETING MINUTES
REQUEST TO REFLECT OUR
CONCURRENCE TO THE FORECAST.
THIS IS JUST A FORMAL TEST TO
MAKE SURE IT IS IN OUR MEETING
NOTES. AS I NOTED UNDER OUR
BYLAWS, WE HAVE THE ABILITY TO
APPROVE THE FORECAST WITHOUT A
VOTE BY NAME. OKAY. I AM SEEING
NODS. DIRECTOR NOBLE , I THINK
THAT CONCLUDES OUR COMMENTS
HERE ON ITEM NUMBER FOUR.
BEFORE WE RETURN TO ITEM NUMBER
TWO, WHICH IS REGARDING THE
ACCURACY OF PREVIOUS
FORECASTS, WOULD YOU LIKE TO
ADD ANYTHING ELSE TO THE
DISCUSSION REGARDING THE
PRESENTATION OF THE FORECAST
FOR THE REMAINDER OF 2022 AND
THE UPCOMING BIENNIUM REGARDING
CALENDAR YEARS 2023 AND 2024?
>> I WOULD ONLY LIKE TO
ACKNOWLEDGE YOUR COLLECTIVE
APPRECIATION AND TO SAY , IT IS
NO FUN TO BE THE BEARER OF BAD
NEWS CANDIDLY AND THE
BALANCING . WE DO OUR BEST.
WE WILL CONTINUE TO DO THAT
AND BRING YOU WHAT WE KNOW AS
WE KNOW IT. AGAIN, THAT YOU
ACCEPT THOSE EFFORTS IS DEEPLY
APPRECIATED.
>> THANK YOU VERY MUCH. WE WILL
MAKE SURE TO SEND TO THE
FORECAST COUNCIL MEMBERS, AS
WELL, THE REVISED CALENDAR FOR
THE SEATTLE CITY COUNCIL'S
BUDGET DELIBERATIONS. THERE IS
A NEW , UPDATED CALENDAR,
THANKS TO THE COMMUNICATIONS
OFFICE WITHIN OUR LEGISLATIVE
BRANCH. THANKS TO THE
COMMUNICATIONS TEAM FOR THE
QUICK WORK TO UPDATE THE
CALENDAR FOR THOSE SUGGESTED
DATES. WE WILL SEND THAT
AROUND. IF ANYBODY IS
LISTENING, AS MEMBERS OF THE
PUBLIC, AND WOULD LIKE TO
PROVIDE ADDITIONAL COMMENTS ON
EITHER THE REVENUE FORECAST OR
THE BUDGET, THE NEXT PUBLIC
COMMENT PERIOD YOU CAN PROVIDE
THAT IS AT 8:30 NEXT TUESDAY,
NOVEMBER 8. WE WILL HAVE
ANOTHER OPPORTUNITY AT 5:00 PM
THE FOLLOWING WEEK, NOVEMBER
15th. OKAY. I THINK THAT BRINGS
US TO THE REVIEW OF THE
FORECAST OFFICE EMPIRICAL
ASSESSMENT OF FORECAST
ACCURACY. THIS IS AN IMPORTANT
ITEM. THANK YOU FOR ALLOWING US
TO REARRANGE THE AGENDA SO WE
COULD GET RIGHT INTO THE HEART
OF WHAT THE FORECAST WAS
PROJECTING. THIS IS A REALLY
IMPORTANT OPPORTUNITY FOR THE
OFFICE OF ECONOMIC AND REVENUE
FORECAST TO PROVIDE A QUICK
SUMMARY ON THE HISTORIC
ACCURACY OF THE CITY FOR
REVENUE FORECAST. THIS WAS
LAUNCHED ON HER OWN VOLITION.
IT WAS GIVEN THE ROLE THEY ARE
IN TO MAKE SURE THAT THE
REVENUE FORECASTS ARE AS
ACCURATE AS POSSIBLE AND TO
ENSURE THEY ARE PROVIDING UP
TO THE DAY, ACCURATE
INFORMATION FOR THE CITY'S
BUDGETING PROCESS. I REALLY
APPRECIATE THEY HAVE TAKEN ON
THIS ANALYSIS AND LOOK FORWARD
TO FUTURE CONVERSATIONS,
COLLEAGUES ON THE COUNCIL,
ABOUT HOW WE MAY SUPPORT THE
OFFICE OF RECORD NEW PLANS
ECONOMIC FORECAST SO THEY CAN
CONTINUE TO PROVIDE AN ACCURATE
REFLECTION OF THE UPCOMING
FORECAST AND FROM AN
ACCOUNTABILITY PERSPECTIVE, TO
CONTINUE TO LOOK AT THE
ACCURACY OF PAST FORECAST, AS
WELL. AS DIRECTOR NOBLE WILL
DESCRIBE, THEY HAVE DONE 10
PLUS YEARS OF FORECAST HISTORY
TO ANSWER THE BASIC QUESTION OF
WHETHER OR NOT THEY ARE
PROVIDING GOOD VALUE TO
UNDERSTANDING THE TRACK RECORD
AND PROVIDE ACCURATE FORECASTS
IN THE PAST. THE PRESENTATION
HERE INCLUDES A NUMBER OF THOSE
RECOMMENDATIONS REGARDING
FUTURE WORK FOR THE FORECAST
OFFICE. THERE IS NO DECISION,
AS I JUST NOTED, ABOUT WHETHER
OR NOT TO TAKE UP THOSE
RECOMMENDATIONS. I THINK WE
WILL HAVE TIME AFTER THE
CONCLUSION OF THIS CALENDAR
YEAR, AS WE HEAD INTO THE FIRST
QUARTER OF NEXT YEAR, TO
REVISIT THESE RECOMMENDATIONS
AND ENSURE WE ARE PROVIDING THE
NECESSARY SUPPORT TO THE
FORECAST COUNCIL OFFICE.
DIRECTOR NOBLE , THANKS AGAIN
TO SUGGEST TO INCLUDE THIS ON
THE AGENDA. FOR THE PURPOSES OF
THE RECORD, WE ARE ON AGENDA
ITEM NUMBER TWO, NOW THE LAST
ITEM ON THE AGENDA . DIRECTOR
NOBLE , I WILL TURN IT BACK
OVER TO YOU.
>> THANK YOU VERY MUCH. JUST
CREDIT TO MY COLLEAGUE WHO
HAS CONTINUED THIS WORK AND THE
FOLKS AT THE BUDGET OFFICE WHO
COMPILED THE DATA AND THE HELP
ALONG THE WAY. THE BASIC
PREMISE HERE OR PURPOSE WAS TO
GIVE YOU A SENSE OF HOW GOOD WE
WERE DOING AT THIS . GIVING YOU
THESE NUMBERS, THIS NEW FORMAT
ON A QUARTERLY BASIS, THE
DEPARTMENT ACCEPTING OUR
RECOMMENDATIONS, I AM NOT SURE
YOU KNOW EXACTLY WHAT IT LOOKS
LIKE. WE HAVE SPENT SOME TIME
LOOKING BACK AT THE HISTORY
THIS YEAR TO GET A SENSE OF
THAT. I AM GOING TO STOP AND
GET GOING HERE. CAN YOU ALL
SEE THAT?
>> YOU KNOW, WE STILL SEE THE
BAD NEWS FROM THE REET
FORECAST.
>> ONE SECOND. LET ME GO. LET
ME GO BACK THERE.
>> THAT IS THE WRONG ONE.
>> WHILE YOU ARE SEARCHING FOR
THAT, I WILL TAKE A SECOND TO
THANK, AS WELL, SEATTLE
CHANNEL. WE HAD REALLY WANTED
TO MAKE SURE THIS INFORMATION
WAS BROADCAST OUT TO THE
COMMUNITY MEMBERS OF THE
MEDIA, AS WELL AS
COUNCILMEMBERS IN REAL TIME.
SEATTLE CHANNEL MAKES THAT
POSSIBLE. COLLEAGUES, THIS IS
OUR FOURTH AND FINAL MEETING OF
THE YEAR. HAPPY TO TAKE
FEEDBACK FROM ALL OF YOU TO
ENSURE THESE MEETINGS ARE
WORKING WELL FOR YOU AS WE HEAD
INTO NEXT YEAR. THIS WAS THE
INAUGURAL YEAR FOR THE FORECAST
COUNCILMEMBERS AND FOR THE
OFFICE OF ECONOMIC AND REVENUE
FORECAST. PLEASE DO LET US KNOW
AFTER THE CONCLUSION OF THIS
MEETING AND ANYTIME BEFORE OUR
NEXT MEETING IN COURT A ONE IF
YOU HAVE ANY FEEDBACK. THANKS
AGAIN TO SEATTLE CHANNEL FOR
CONTINUING TO BROADCAST IS ALSO
EVERYBODY GETS THE INFORMATION
IN REAL-TIME. GO AHEAD,
DIRECTOR NOBLE .
>> CAN YOU SEE IT YET ?
PERFECT . HERE ARE THE
FINDINGS AND RECOMMENDATIONS.
WHY DO WE DO THIS? WHAT
MOTIVATED THIS ANALYSIS? ONE
THING WAS THE VOLATILITY. I
WILL DESCRIBE THIS CHART IN
JUST A SECOND. DURING 2020 AND
2021, WE HAD AN UNUSUAL
VOLATILITY IN THE FORECAST AND
SIGNIFICANT REVISIONS. AGAIN, I
WILL EXPLAIN THAT IN A SECOND.
WITH THINGS BOUNCING AROUND,
BEING IS WRONG AS WE WERE, WE
WERE TRYING TO UNDERSTAND WHAT
THE DRIVERS WERE THERE. THIS
WAS THE KEY PIECE. AT A STAFF
LEVEL, WE HAVE BEEN REPORTING
IT OUT, WE OBSERVED A PATTERN
OF UNDER FORECASTING. WE GET TO
THE END OF THE YEAR WE LOOK AT
THE BALANCES OF THE TOTAL
REVENUES THAT WERE EARNED OVER
THE COURSE OF THE YEAR, WE
DON'T GET THOSE TOTALS USUALLY
IN MARCH FOR THE PREVIOUS YEAR.
WE CAN TAKE IN A LITTLE MORE
REVENUE THAN WE THOUGHT. THAT
WAS A REGULAR PATTERN. WE
WANTED TO GET A BETTER
UNDERSTANDING OF WHY THAT
HAPPENS. ANOTHER ISSUE, WE
DON'T HAVE A HISTORY TO REALLY
DIVE IN ON THIS. THE
INCREASING LOOK OF DEDICATED
FUNDING SOURCES, THINGS LIKE
THE PAYROLL TAX, ADMISSIONS
TAX, SWEETENED BEVERAGE,
JUMPSTART PAYROLL, WE HAVE A
SINGLE SOURCE SUPPORTING A SET
OF ACTIVITIES, UNDERSTANDING
THE ACCURACY OF THAT FORECAST
IS PARTICULARLY IMPORTANT. IF
THOSE REVENUES FALL SHORT,
THERE IS AND ANYWHERE ELSE TO
MAKE IT UP. THOSE ACTIVITIES
THAT ARE FUNDED FROM THAT
REVENUE STREAM OR GOING TO BE
DIRECTLY AFFECTED. PROBABLY THE
BEST THING YOU CAN DO IS BUILD
UP A RESERVE TO CUSHION THOSE
CHANGES. IF YOU DON'T HAVE A
SENSE OF THE ACCURACY, YOU
DON'T HAVE BIG A RESERVE, FOR
THE VOLATILITY, ANYWAY, YOU
DON'T HAVE A SENSE OF WHAT THE
RESERVE SHOULD BE. THIS CHART
ON THE RIGHT, I JUST WANT TO
TAKE A SECOND TO EXPLAIN THIS
TO YOU. WHAT WE ARE DOING IS
MEASURING HOW FAR OFF WE WERE
IN THE FINAL NUMBERS AT ANY
GIVEN STAGE. LOOKING FIRST AT
THE BLUE LINE, THE FIRST DATA
POINT IS THE FORECAST REMAINS
FOR GENERAL FUND REVENUES, A
SET OF REVENUES REPRESENT
ABOUT 85%. SO IN APRIL 2019,
A YEAR AHEAD IS WHEN WE DO THE
FORECAST, WE PROJECTED THE
NUMBER FOR THE GENERAL FUND
THAT TURNED OUT TO BE ABOUT 13%
HIGHER THAN IT ACTUALLY WAS.
THAT FORECAST WAS OFF BY 13%.
WE COULDN'T PREDICT THE
PANDEMIC A YEAR IN ADVANCE. WE
COULD NOT PREDICT IT IN AUGUST
OR NOVEMBER, EITHER. THE NEXT
TWO DATA POINTS BACK, THOSE
WERE STANDARD MINOR FORECAST
REVISIONS. THEY TURNED OUT TO
BE SUBSTANTIALLY WRONG. IN
APRIL 2020, THEN WE KNEW THERE
WAS A PANDEMIC. WE DRASTICALLY
REVISED THE FORECAST. THAT
FORECAST MEASURED WELL INTO
THE FINAL REVENUE AND TURNED
OFF INSTEAD OF OVER, IT WAS
UNDER. THAT IS THE WAY WE ARE
DOING THIS ANALYSIS, WE GUESS
TOO LOW, THAT IS A NEGATIVE
NUMBER, IF YOU WILL. WE WERE
OVERLY PESSIMISTIC ABOUT WHAT
THE PANDEMIC WOULD DO, NOT
WILDLY SO, 2.5%, BUT THAT WAS
IN APRIL 2020. THERE WERE
THINGS THAT WE DID NOT SEE
RIPPLE THROUGH THE ECONOMY. IN
AUGUST, THAT SAME YEAR, WE
BROUGHT THE FORECAST AND A
LITTLE BIT. WE PROMPTLY BROUGHT
IT BACK UP IN THE WHIPSAW,
WHICH WE DON'T LIKE, THERE ARE
EXPLANATIONS AROUND THAT
PARTICULAR PATH OF THE
PANDEMIC, THE FACT THAT
RECOVERY WASN'T REALLY SEEN IN
THE DATA UNTIL THE THIRD
QUARTER OF 2020. THE RED LINE
IS FORECAST FOR 2021. AGAIN,
THE FIRST FORECAST THERE IS
ACTUALLY APRIL 2020, THE FIRST
FORECAST AFTER THE PANDEMIC.
AGAIN, WE WERE PREDICTING 2021,
20 MONTHS OUT AT THAT POINT.
WE WERE OFF BY MORE THAN THAT,
WE UNDER FORECAST BY MORE THAN
10% . LIKE EVERYBODY ELSE, WE
EXPECTED THAT THE PANDEMIC
WOULD HAVE LASTING EFFECTS,
EXIST WELL INTO 2021, WE DID
KNOW ABOUT THE FEDERAL
GOVERNMENT'S STIMULUS
INTERVENTIONS AND THE LIKE .
WHAT YOU SEE THERE AS WE GET
MORE INFORMATION AND UNDERSTOOD
THE PANDEMIC BETTER AND IT TOOK
TIME TO REFINE THOSE FORECASTS
OVER TIME INTO 2021, AND
ULTIMATELY, WE GOT PRETTY
CLOSE. THAT PICTURE THAT SHOWS
YOU THAT DIVERGENCE AND HOW IT
CHANGES OVER TIME AS WE MOVE
THROUGH THE SLIDES . JUST A
LITTLE BIT OF BACKGROUND .
AGAIN, I AM CONSCIOUS OF TIME
AS I GO THROUGH THIS, THINGS TO
KNOW. WE TALKED ABOUT THIS A
LOT. THE FORECASTING IS A TWO
STEP PROCESS. WE GET THE
NATIONAL INPUT, THE FIGURES
FROM IHS MARKIT, WE USE THOSE
TO DEVELOP A REGIONAL MODEL ,
INFLATION AND THE LIKE . THAT
WE HAVE A SET OF MODELS THAT
USE THE NATIONAL FORECAST AND
THE REGIONAL FORECAST OF THE
ECONOMICS AND USE THOSE TO
PREDICT ACTUAL REVENUES. THE
REGIONAL EMPLOYMENT WILL BE
THIS MUCH AND THAT PROBABLY
IMPLIES THAT SALES TAX WILL BE
THIS. IT IS NOT JUST REASONABLE
PLANS REGIONAL EMPLOYMENT, IT
IS IN, AND A VARIETY OF
FACTORS. THE KEY INPUTS ARE THE
NATIONAL FORECAST AND ALSO DATA
FROM VARIOUS GOVERNMENT
ENTITIES, THE STATE AND FEDERAL
GOVERNMENT DRIVING THIS
INFORMATION ABOUT UNEMPLOYMENT
AND AGGREGATING DATA, AGAIN,
YOU SAW IN THE SHOWER BEFORE,
THERE ARE SIX MOMENTS IN THE
PROCESS WHERE WE DO THE
FORECAST. WE START 20 MONTHS
AHEAD WITH THE INITIALLY FULL
FORECAST. WE SHOWED YOU THE
FORECAST FOR 2023 AND 2024 IN
APRIL OF THIS YEAR,
PARTICULARLY IN 2023. THAT IS
20 MONTHS BEFORE THE END OF
2023. WE THEN UPDATE THOSE IN
AUGUST AND NOVEMBER. THOSE OF
THE YEAR AHEAD FORECASTS. AS
THE YEAR ARRIVES, IN 2023 WE
START UP FOR JANUARY SHORTLY
AND WE CONTINUE TO REFINE EVEN
THOSE 2023 ESTIMATES. FOR
INSTANCE, WE JUST GIVE YOU NEW
ESTIMATES FOR 2022. WE HAD YOU
UP A BIT BY 10 MILLION. THERE
ARE THOSE SETS WITHIN THOSE
ESTIMATES. THERE ARE SIX
DIFFERENT ESTIMATES THAT WE
MAKE OVER TIME. OTHER
IMPORTANT POINT, THIS LAST ONE,
YOU MIGHT ASK , WHEN DOING
THESE ESTIMATES, YOU ARE
PROJECTING HOW MUCH MONEY WE
WILL HAVE IN 2022 AND YOU WILL
HAVE TWO MONTHS LEFT. WHY DON'T
YOU GET THAT 100%? THE ANSWER
IS ACTUALLY IN THIS CHART.
ALTHOUGH WE'RE SITTING IN
NOVEMBER, WE HAVE ONLY HAD
SOMEWHERE AROUND 60% OF THE
CITY'S ANNUAL REVENUES .
REVENUES ARE COLLECTED WITH A
DELAY. ESSENTIALLY, ONE OR TWO
MONTH DELAY. WE DON'T KNOW WELL
INTO FEBRUARY THROUGH THE END
OF FEBRUARY, WHAT ARE FULL
REVENUE TAKE IS. THAT IS
IMPORTANT TO UNDERSTAND. WITHIN
YOUR ESTIMATES, THOSE ARE BEING
MADE WITH PARTIAL INFORMATION.
THAT IS BACKGROUND. IN TERMS OF
SCOPE AND APPROACH, WE REVIEW
THE FORECAST , WE DID FROM 2010
TO 2021, THE MODELS HAVE
CHANGED OVER TIME. WE WERE
INTERESTED IN THE 2010 PERIOD
BECAUSE IT CONTRASTED WITH THE
LAST RECESSIONARY PERIOD. WE
FOCUSED ON THINGS THAT WERE
MOST ECONOMICALLY DEPENDENT,
WHERE WE ARE SPENDING OUR TIME
FORECASTING. IT INCLUDED ABOUT
85% OF THE GENERAL FUND. WE DID
FIND GREAT EXAMPLES, LIKE
GRANTS, IN APRIL , 20 MONTHS
AHEAD, WE DON'T KNOW WHAT
GRANTS THE CITY WILL GET. IT IS
NOT REALLY MATERIAL TO
UNDERSTANDING WHAT THE PROCESS
IS OR SPECIFIC PURPOSES OVER
TIME. SIMILARLY, THE DEPARTMENT
FOR SPECIFIC FEES, THEY
GENERATE A CERTAIN AMOUNT OF
REVENUE BUT THERE ARE VARIETY
OF REVENUE REASONS WHY THOSE
CHANGES OVER TIME, POLICY
CHANGES AND WITH HISTORY, WE
LOOK BACK AND WE HAVE DONE ALL
THE RESEARCH CC WHEN EACH OF
THOSE RATES HAVE CHANGED OVER
TIME AND WHEN THOSE WERE
FORECASTING NEW RATES. IT WAS
JUST TOO MUCH. SEPARATELY,
BEYOND THE GENERAL FUND, WE DID
LOOK AT , AS I MENTIONED, WE
LOOKED AT THE THREE YEAR AHEAD
AND THE THREE WITHIN YOUR
FORECAST. IF WE UNDER
FORECAST, WE TAKE THAT AS A
NEGATIVE NUMBER. THAT MEANS WE
ENDED UP WITH MORE MONEY THAN
WE OUGHT . IF WE A FORECAST,
THAT IS A NET POSITIVE. WHAT
DO WE FIND? THE BIGGEST
FINDING , THIS CHART IS SET UP
AS THE SAME AS BEFORE. IT
SHOWS YOU 20 MONTHS OUT AND
MOVING THROUGH THE PROCESS. THE
BIGGEST THING, I WILL GO YEAR
BY YEAR. YOU CAN SEE WE ARE
QUITE ACCURATE AND THE
ACCURACY IMPROVES OVER TIME.
FROM 2019 THE INITIAL FORECAST
IS PRETTY GOOD. 20 MONTHS OUT,
WE WERE 3% BELOW WITH THE
ACTUAL FLOORS WERE. BY THE
END, WE WERE 1 1/2%. WE WERE
STILL OFF IN NOVEMBER OVER THE
THEN CURRENT YEAR, NOVEMBER
2019 FORECAST ENDED UP BEING UP
BY 1%. 2018, SIMILAR. WE GOT
CLOSE. 2017, ALSO SIMILAR. YOU
KNOW, THERE WERE CORRECTIONS
OVER TIME. AS I KEEP GOING,
KIND OF BECOMES PRETTY CLEAR.
WHAT YOU SEE IS THAT WE START
OFF RELATIVELY CONSERVATIVE AND
BECOME LESS SO OVER TIME.
AGAIN, IT IS NOT SOME MATERIAL
BUT THERE ARE A COUPLE YEARS,
2011 AND 2010, WHERE WE
INITIALLY WERE ABOVE THE AXLES
AND BROUGHT THEM DENNING GOT
CLOSER. IN 2010, WE WERE
ACTUALLY OVER AT THE END.
ACTUAL REVENUES ENDED UP BEING
LESS THAN WE FORECASTED. THE
NEXT LINE IS THE AVERAGE. I
WILL MOVE ON AND JUST FOCUS
FOR SECOND ON THE AVERAGE.
THIS IS THE KEY MESSAGE. ON
AVERAGE, WE DO QUITE WELL. ON
AVERAGE WE GET IT DOWN TO LESS
TAN 1% BY THE TIME WE'RE DONE.
IT STARTS OUT AT NO MORE THAN
2%. WE ARE CONSISTENTLY UNDER
FORECASTING. IN THAT SENSE,
CONSERVATIVE. FROM A BUDGETARY
PERSPECTIVE, THAT FEELS LIKE A
BETTER PLACE TO BE THAN BEING
OVER BECAUSE IF YOU WANT A
FORECAST, THE MONEY WILL COME
TO THE CITY, YOU WILL GET TO
SPEND IT, YOU WON'T GET
SUSPENDED AS QUICKLY AS YOU
OTHERWISE WOULD HAVE.
ALTERNATIVELY, IF YOU OVER
FORECAST, YOU END UP IN A
SITUATION WHERE YOU
OVERCOMMITTED YOURSELF YOU
EITHER HAVE TO CALL ON THE
RESERVE OR YOU HAVE TO CANCEL
SOME OF YOUR PROJECTS. THIS IS
THE PATTERN. I CAN MAKE THAT
JUSTIFICATION FOR WHY UNDER IS
BETTER THAN OVER, BUT WE STILL
WANT TO UNDERSTAND WHY. WE
DON'T WANT TO DO THIS FURTHER.
WE ARE LOOKING AT WHY. THIS
CHART IS GOING TO, IT IS
DESIGNED TO SHOW YOU THE
RELATIVE, LOOK AT ALL THOSE
REVENUE STREAMS AND LET US
KNOW WHICH ONE OF THESE IS THE
PROBLEM, WHICH SET OF THESE ARE
CREATING THE ERROR? THIS CHART
MEASURES THE RELATIVE CON
ERROR.
>> THESE ARE THE ADOPTED , THEY
WILL ALL BE THE SAME SO IT IS
EASIER TO PUT THEM ON THE PAGE.
BUT WILL HOPEFULLY JUMP OUT AT
YOU RIGHT AWAY IS THAT THE
BIGGEST CONTRIBUTORS ARE RETAIL
SALES AND B&O. WE WERE OFF BY
ONE AND A HALF ON AVERAGE,
ABOUT 1%. WHERE WE ARE MAKING
OUR MISTAKES, RETAIL SALES AND
B&O. ANOTHER PLACE, IF YOU
LOOK AT THE OTHER SIDE, THOSE
LIGHTS OUT TO THE RIGHT ARE
TELEPHONES. WE WERE OVER
FORECASTING TELEPHONE TEXT
REVENUES FOR A WHILE. WE MADE
SOME SPECIFIC EFFORTS IN THE
PAST. THAT WAS JUST SWITCHING
UP. IN ANY CASE, THIS IS THE
IN YEAR, THE ONES THAT HAPPENED
WITHIN THE YEAR. THE BIG
DRIVERS ARE STILL RETAIL SALES
AND B&O. AGAIN, GENERALLY
CLOSER OVER TIME BUT THAT IS
WHERE THE ERRORS ARE. A COUPLE
OF THE OTHER ONES, BUT MUCH
LESS SO. THEN WE DUG IN. WHAT
IS GOING ON WITH SALES AND B&O?
THOSE ARE THE ONES THAT ARE
THE MOST ECONOMICALLY
INDEPENDENT. THEY ARE HEAVILY
DEPENDED ON THE NATIONAL AND
REGIONAL MARKETS. THE REGIONAL
FORECAST IS REALLY DEPENDENT ON
THE NATIONAL FORECAST AND ON
FEDERAL AGENCIES. WE WENT AND
LOOKED AT THE INPUT DATA TO TRY
TO SEE WHAT WAS GOING ON THERE.
WE FOUND INTERESTING THINGS.
ONE IS THAT IHS MARKIT, WE
SHOWED YOU AT THE LAST
PRESENTATION, THE FORECAST WAS
SOMEWHAT CONSERVATIVE COMPARED
TO OTHERS. IT TURNS OUT THEY
WERE ALSO CONSERVATIVE COMPARED
TO ACTUALS. WE WENT BACK AND
LOOKED AND OVER TIME THEY HAD A
TENDENCY TO UNDER PREDICT BOTH
INCOME AND EMPLOYMENT. WE FEED
THOSE NUMBERS INTO OUR MODELS.
THAT EXPLAINS THIS AND THE NEXT
ISSUE EXPLAINS HALF OF OUR
ERROR . WE WILL TALK ABOUT A
LITTLE BIT, THERE MIGHT BE
SOMETHING WE CAN DO ON THIS
ONE. THE NEXT ONE, WHICH IS
ACTUAL ERRORS IN THE INPUT DATA
THAT WE CAN GET FROM THE STATE
AND THE FEDS, THERE IS LESS WE
CAN DO ABOUT THOSE. WHAT IS
HAPPENING THERE, THEY ARE
TRYING TO MEASURE THOSE THINGS
IN REAL-TIME WITH A ONE QUARTER
LAG. THEIR MEASUREMENTS ARE
IMPRECISE. THEY ARE DOING
SURVEYS , SAMPLES RATHER THAN A
FULL SET. OVER TIME, THEY GET
OTHER INFORMATION IN THEY
REVISE THE NUMBERS. THE
CURRENT FORECAST JUST HAD A
REVISION. THE BOTTOM LINE, THE
INPUT DATA IS A BIG PART OF
WHY WE MADE ERRORS IN
FORECASTING. SOME OF THAT WE
MIGHT BE ABLE TO FIX BUT DATA
FROM THE FEDS AND THE STATE,
THERE'S JUST NOT THAT MUCH WE
CAN DO. WHAT HAPPEN IN 2020
AND 2021? THESE CHARTS ON THE
RIGHT ARE SIMILAR. I ADDED A
TOTAL BAR SO YOU COULD SEE. IN
2020, THESE ARE THE YOUR HEADS,
THE ONES WE ARE MAKING IN
APRIL. I TOLD YOU IN THAT
SLIDE, WE WERE ALMOST 15% OFF.
THE STORY TURNS OUT TO BE THE
SAME. NAMELY SALES AND B&O
WERE THE PROBLEM. IN THAT CASE,
PARKING METERS WERE A BIG
ISSUE. PARKING METERS WERE A
$30 MILLION SOURCE BUT THANKS
TO THE PANDEMIC LARGELY WENT TO
ZERO. WE COULD NOT HAVE BEEN
DISSIPATED THAT. THAT JUST
SHOWS THE VOLATILITY. IN 2021,
THESE WERE WHEN WE WERE UNDER
FORECASTING BECAUSE WE DIDN'T
UNDERSTAND WHEN THE RECOVERY
WOULD SET IN. IT WAS ALL ABOUT
SALES AND B&O. IT REINFORCES IT
THAT HE GOES TO THE AREA THAT
ARE THE BIGGEST CHALLENGES AND
THE MOST IMPORTANT. FINDINGS
AND RECOMMENDATIONS.
SIGNIFICANT FINDINGS, FOR 2010
TO 2019, THESE ARE QUITE
ACCURATE. IF THAT MAKES YOU
FEEL BETTER, IT DID ME, I HAD
TO LOOK AT THE NUMBERS TO SEE
THAT. FORECAST ERRORS NARROW
THROUGH THE BUDGET PROCESS AND
GETS CLOSER TO ACTUALS. IT IS
WHAT YOU WOULD EXPECT.
ALTHOUGH WE HAVE BEEN ACCURATE,
WE HAVE SHOWN THERE IS A
HISTORIC UNDER FORECASTING
LARGELY BECAUSE OF RETAIL AND
B&O. THAT IN TURN IS LARGELY
THE INPUT DATA. THEY DID NOT
PUT UP THE REET SO WE HAVE
BEEN UNDER FORECASTING THAT UP
TO 15%, LARGELY BECAUSE,
SIGNIFICANTLY BECAUSE THINGS
CHANGE LATE IN THE YEAR. IT IS
HARD TO KNOW. THERE HAS BEEN
SOME VOLATILITY. IN TERMS OF
RECOMMENDATIONS, WE ARE
RUNNING OUT OF TIME, ONE THING
IS, WE HAVE BEEN FORECASTING
PRETTY SEMESTER PLANS
SYSTEMATICALLY, WE DON'T HAVE
CONFIDENCE THAT WILL CONTINUE.
THE MODELS WE HAVE BEEN
FINDING OVER TIME, THE LAST 10
YEARS HAVE BEEN REALLY STEADY,
WHICH IS GREAT FOR DEVELOPING A
MODEL. YOU DON'T HAVE BIG
SWINGS AND YOU CAN FINE-TUNE
IT. THEY ARE NOW BEING
CHALLENGED BY VERY BIG SWINGS
IN DATA. AGAIN, I WOULD NOT
ASSUME WE WILL IN THE FORECAST
GOING FOR. ONE THIN WE CAN DO,
WE HAVE ACTUALLY OF A WE COULD
TAKE A LOOK AT SOME OTHER
NATIONAL FORECASTERS PROVIDE
ADDITIONAL USEFUL INFORMATION.
ASHLEY JUST SUBSCRIPTIONS TO
ANOTHER NATIONAL FORECASTER TO
DO COMPARISONS AND WE CAN USE
THAT INFORMATION AS WE GO FOR.
AGAIN, THAT SEEM TO BE A
SIGNIFICANT SOURCE OF ERROR. WE
WILL WORK ON MODELS. WE WILL
WORK ON THE EXPENSE MODEL.
SEAN THOMPSON HAS BEEN WORKING
THROUGH SOME OF THE DATA SO WE
CAN DO THAT ANALYSIS ON WHICH
REAL ESTATE TRANSACTIONS ARE
RESIDENTIAL AND WHICH ARE
COMMERCIAL. THAT IS SOMETHING
WE ARE SPENDING TIME ON. SOME
OF THE OTHER ONES I MENTIONED,
AGAIN, THERE ARE OTHER IMPACTS
WE WANT TO SPEND TIME ON. THE
CLIMATE PLEDGE HAS INTRODUCED
A NEW REVENUE STREAM. WE NEED
TO UNDERSTAND IT BETTER. AT A
HIGH LEVEL, WE CARE ABOUT THE
ACCURACY. WE SEE IT IS PRETTY
GOOD. WE WANT TO MAKE IT
BETTER. THESE ARE SOME THE WAYS
WE ARE APPROACHING IT. THAT IS
ESSENTIALLY WHAT WE HAVE.
AGAIN, INFORMATIONAL PURPOSES.
I AM HAPPY TO ANSWER ANY
QUESTIONS AND VISIT OUR NEXT
MEETING.
>> THANK YOU, DIRECTOR
DINGLEY, GO AHEAD.
>> THANK YOU FOR THE
PRESENTATION AND THE WORK YOUR
TEAM HAS DONE TO REVIEW THAT
ACCURACY. I, FOR ONE, AM QUITE
ENCOURAGED AT THE ACCURACY WE
HAVE FOUND OF THE LAST SEVERAL
YEARS. KUDOS TO THE REVENUE
FORECASTERS IN THAT SPACE. THE
FORECASTER OF 1% IS PRETTY
REMARKABLE, ALL THINGS
CONSIDERED. THERE IS ROOM FOR
IMPROVEMENT, WE APPRECIATE YOUR
RECOMMENDATIONS, AS WELL.
>> THANK YOU , DR. DINGLEY.
AGREED. I ALSO WANT TO BE
AVAILABLE TO HELP OUT ON SOME
OF THE RECOMMENDATIONS YOU
OUTLINED, AS WELL. I THINK WE
WILL ALL BE IN A BETTER
THOSE RECOMMENDATIONS AT F -
QUARTER 1 NEXT YEAR. THANK YOU
FOR THE EARLY PREVIEW OF THOSE
RECOMMENDATIONS TO AT DOCTORED
DINGLEY'S COMMENTS WITHIN THE
RANGE YOU HAVE NOTED. WE ARE
ALL PRETTY PLEASED WITH THAT.
WE KNOW YOU WANT TO CONTINUE TO
IMPROVE ON THE FORECAST
ACCURACY. THANKS FOR FLAGGING
WAYS TO CONTINUE TO DO THAT.
ARE THERE ANY ADDITIONAL
COMMENTS OR QUESTIONS ON THIS
ITEM?
>> I AM NOT SEEING ANY. OKAY.
DIRECTOR NOBLE OR TEAM, ARE
THERE ADDITIONAL COMMENTS YOU
HAVE ON THE TOPIC?
>> WE ARE GOOD.
>> OKAY. GREAT. WE ARE AT
2:02, THE HOUR WE ASSUMED WE
COULD ADJOURN. WITH ALL THE
NEWS WE RECEIVED TODAY, WE WILL
ALL BE BUSY OVER THE NEXT FEW
WEEKS. THE NEXT MEETING, AGAIN,
WILL BE IN THE FIRST QUARTER OF
2023. I DON'T BELIEVE WE HAVE
YET A CALENDAR BUT WE WILL GET
THAT SENT AROUND AND WORK WITH
YOUR CALENDARS TO ENSURE IT
WILL WORK FOR EVERYONE. WE WILL
MEET QUARTERLY AGAIN TO RECEIVE
FINANCIAL UPDATES AND REVISED
FORECASTS. WE WILL ALSO BE ABLE
TO CONTINUE TO WORK IN
REAL-TIME TO ENSURE THE
PROJECTIONS ARE ALIGNING WITH
OUR ASSUMPTIONS IN THE BUDGET,
ONCE THAT IS FINALIZED. THIS
WILL BE A VERY IMPORTANT TIME
FOR US, NOT ONLY TO ENSURE WE
HAVE A BALANCED BUDGET BUT THAT
WE ARE ACCURATELY AND
UPCOMING NEEDS TO THE TO THE
COMMUNITY, BOTH WORKING FAMILY
NEEDS, INDIVIDUAL NEEDS,
BUSINESS NEEDS AND BUSINESS,
INFRASTRUCTURE AND
TRANSPORTATION IS. LOTS TO
CONSIDER AS WE WEIGH THE
NATIONAL AND GLOBAL DYNAMICS
AFFECTING ARE REVENUE
STABILITY IN SEATTLE AND WE
LOOK FORWARD, AGAIN, TO
WORKING WITH THE EXECUTIVE
BRANCH OF MEMBERS OF THE
COMMUNITY AS WE THINK ABOUT
DEPLOYING LONG-TERM SOLUTIONS,
NOT SHORT-TERM SOLUTIONS. THAT
IS WHAT WE WILL FOCUS ON FOR
THE NEXT FEW WEEKS HERE , JUST
TO CREATE A BALANCED BUDGET,
BUT WE NEED THE LONG-TERM
STABLE FINANCIAL REVENUE SO
THAT THE CITY'S FINANCIAL
OUTLOOK CAN BE MORE PREDICTABLE
AND PROGRESSIVE. LOOKING
FORWARD TO CONTINUING THIS
DISCUSSION WITH YOU ALL. OF
COURSE, NOBLE , LET US KNOW IF
ANYTHING COMES UP. WE HAVE
TAKEN AWAY FROM THIS A
SOBERING REMINDER OF THE
NATIONAL AND REGIONAL
ECONOMIES, WHAT THEY ARE FACING
IN THIS PERIOD OF REALLY
CONSIDERABLE UNCERTAINTY AND
TURBULENCE. AGAIN, ALL OF THAT
UNCERTAINTY, STRESS AND WORRY
IS ONLY EXACERBATED AT THE
INDIVIDUAL LEVEL FOR FAMILIES.
WE HAVE OUR WORK CUT OUT FOR US
TO MAKE SURE WE CONTINUE TO
TAKE THIS INFORMATION IN
REAL-TIME TO PLAY IT TO OUR
BUDGET DELIBERATIONS AND WORK
WITH YOU ALL AS A CITY FAMILY
TO ENSURE WE CREATE A BALANCED
BUDGETS TO MAKE FOLKS MEET
THEIR NEEDS. THANK YOU TO THE
EXECUTIVE TEAM WE WILL MEET
OVER THE NEXT FOUR WEEKS. THERE
ARE NO FURTHER QUESTIONS,
AGAIN, THANKS TO EVERYBODY WHO
MADE THE FORECAST POSSIBLE AND
TO EVERYONE WHO IS MAKING IT
POSSIBLE TO PROJECTED OUT TO
MEMBERS OF THE COMMUNITY IN
REAL-TIME. WE WILL BE ADJOURNED
WITH A FUTURE MEETING IN
QUARTER 1.
>>