With forecasts including Depression Era-level unemployment, the City of Seattle is preparing for a potential 20% blow to its budget for vital services as it plans its recovery from the COVID-19 crisis. Mayor Jenny Durkan said it too soon to know if the city employee workforce will need to be reduced and also said she doesn’t think a payroll tax on big business can save the city.
“There are no mechanisms or tricks to magically have money to address that budget shortfall,” she said of the proposed tax.
“The City of Seattle’s Budget Office today announced two economic scenarios for a rapid recovery scenario and a slow recovery scenario,” a statement from Durkan’s office on the budget update reads. “Both scenarios highlight significant job loss, high unemployment and impacts to the City budget which range from $210 million to $300 million.”
The scenarios will be presented to the Seattle City Council Wednesday. The full presentation on the situation is embedded below.
As the first deaths were reported in King County, Seattle was in the midst of an ongoing economic boom with low unemployment. “Today, things have shifted significantly,” Durkan said of the analysis.
The forecasts come as part of the city’s regular budget analysis process but are taking on new levels of importance as city leaders try to better understand the impact of the pandemic and its economic damage.
While the forecasts are giving officials a headstart on preparing for the scenarios, City Hall budget experts still don’t have real-world numbers to work with from the criis. 40% of the general fund made up by sales and business and occupation taxes. When reporting from those sources begins to be available, the outlook in Seattle could become even more bleak.
The analysis lays out two possible recovery scenarios — a rapid recovery boosted by heavy, immediate federal support or a slower, more gradual recovery.
“In developing updated forecasts of these revenues, the City faces the challenge of very uncertain economic conditions driven largely by the duration of social distancing measures,” the mayor’s statement reads. “This uncertain future has led to a forecast that captures a range of potential financial impacts by estimating revenues under two different scenarios: one that is consistent with a relatively rapid economic recovery and another that anticipates a slower recovery in the local economy.”
Both of the scenarios Seattle City Hall is using are based on a recession “that is short but deep” but differ in projected lost jobs, personal income and overall economic activity, “and the time it takes for the economy to climb out.”
Seattle’s worst case scenario projects a near $300 million shortfall — around 20% — in the city’s planned budget.
In addition to lower revenue, Durkan says “the city deployed significant resources quickly towards programs to help those most in need” further stretching the city’s financial strength. As of April 12th, Durkan’s office says the city has spent more than $15 million “on new programs for hygiene services, shelters, meals, and small business relief, with millions of additional funds committed to support ongoing programs.” Replacing those fund will be done “primarily” through federal and state resources, the mayor’s statement reads.
One element not on the table for the mayor is a business payroll tax. Durkan said it would be more likely for Seattle to consider issuing bonds to help cover the shortfall.
Any payroll tax would “not be available to address budget shortfalls this year or next year,” Durkan said Tuesday.
Wednesday, the Seattle City Council is scheduled to begin its budget committee discussions on a proposed payroll tax on the biggest two percent of businesses. The Sawant-Morales plan would accelerate the “Amazon Tax” proposal to generate $500 a month Seattle COVID-19 relief payments for up to 100,000 households beginning later this year. The tax would not be collected until 2021 or 2022 and the monthly emergency payments would be funded through borrowing from other existing city funds.
Meanwhile, Tuesday night, Gov. Jay Inslee is scheduled to hold a conference where he is expected to lay out his plan for Washington’s “recovery” from COVID-19.
CHS reported here on the budget concerns for local, transit, and state officials as necessary COVID-19 restrictions took hold.
Mayor Durkan said Tuesday that her city will recover but it will take years, not weeks or months.
“In three and five years, we will see an economy that returns,” Durkan said. “I believe the city has what it need to build a strong and vibrant economy.”
Through Monday, King County has now reported 372 deaths during the outbreak.
- 5/4/20: COVID-19 updates: Phase 1 begins, what’s in Phase 2 (and 3 and 4), King County removes antibody testing case counts, COVID-19 yard art
- 5/1/20: Washington extends COVID-19 restrictions through May, readies ‘four phase’ plan for reopening with limits on groups, restaurant capacity, and travel
- 4/30/20: Washington investigating state totals after COVID-19 ‘excess deaths’ report
- 4/30/20: Facing opposition from mayor and chamber advocates, Seattle tax on big businesses for COVID-19 relief and housing moves toward May vote
- Plus: Capitol Hill Restaurants, Bars, and Cafes offering takeout during COVID-19 ‘stay home’ restrictions
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