>> WELL OKAY. GOOD MORNING,
EVERYONE. THANK YOU VERY MUCH
FOR JOINING THE CITY OF SEATTLE
REVENUE FORECAST COUNCIL
MEETING. TODAY IS APRIL 10th,
2023. THE TIME IS 9:31 A.M.
TODAY'S MEETING IS EXPECTED TO
RUN ABOUT TWO HOURS LONG AND
THIS IS THE MEETING OF THE
REVENUE FORECAST THAT I HAVE TH
PRIVILEGE OF CARING ALONG WITH
OUR VICE CHAIR AND SENIOR DEPUT
MAYOR FOR THE CITY OF SEATTLE,
MONISHA HERRELL. WE ALSO HAVE
ACTING FINANCE DIRECT JANIE
CARNELL AND BRENDEL SWIFT, WHO
IS HERE WITH US ON BEHALF OF
COUNCIL PRESIDENT DEBORA
JUAREZ. THANK YOU FOR BEING WIT
US, AS WELL. WE WILL ALSO BE
JOINED -- BEEN AT THIS MEETING
IS BEING RECORDED.
>> WONDERFUL, WE ARE NOW BEING
RECORDED, EVERYONE. WE WILL ALS
BE JOINED BY STAFF FROM THE
OFFICE OF ECONOMIC AND REVENUE
FORECAST DIVISION, WHO WILL
SHARE WITH US THE LATEST
INFORMATION FOR THE REVENUE
FORECAST ALONG WITH
REPRESENTATIVES FROM THE CITY
BUDGET OFFICE. I SEE DIRECT OR
JULIE DINGLEY WITH US FROM THE
BUDGET OFFICE AS WELL AS SOME
MEMBERS OF HER STAFF. I ALSO
WANT TO THANK THE CENTRAL STAFF
WHO IS WITH US AS THE BUDGET
LEADS AND FISCAL ANALYST ON
BEHALF OF SEATTLE CITY COUNCIL.
THANK YOU VERY MUCH TO ALY
PENNUCCI AND TOM WETZEL AND
OTHERS FOR BEING WITH US EVERY
TIME. THIS IS A QUARTERLY
MEETING, AS FOLKS MIGHT
REMEMBER. THE REVENUE FORECAST
ON A QUARTERLY BASIS PROVIDES U
AN OPPORTUNITY TO CHECK IN
REGARDING THE REVENUE
ASSUMPTIONS THAT UNDERLIE OUR
EXISTING BUDGETS. AND TODAY, I
APRIL, WE HAVE A CHANCE TO LOOK
FORWARD AT OUR 2023-2024 BY
ANNUAL BUDGET THAT WAS ADOPTED
AND ENDORSED BY THE SEATTLE CIT
COUNCIL AND SIGNED BY THE MAYOR
LAST NOVEMBER. THE AUGUST
FORECAST WILL PROVIDE A BASIS
FOR ANY CHANGERS THAT THE
MAYOR'S OFFICE WILL CONSIDER
BEFORE THE EXECUTIVE TRANSMITS
PROPOSED 2024, SUPPLEMENTAL IF
YOU WILL, OR BALANCED BUDGET FO
COUNCIL'S CONSIDERATION. AGAIN,
THE 2024 BUT IT WAS ALREADY
ENDORSED, SO THIS IS REALLY AN
OPPORTUNITY FOR US TO CONSIDER
ANY CHANGES IN THE FORECAST AND
HOW THE EXECUTIVES TRANSMIT
THAT FOR OUR DELIBERATIONS THIS
FALL, WHICH THE COUNCIL WILL
TAKE ON OCTOBER AND NOVEMBER IN
EARNEST TO MAKE SURE THAT WE
HAVE A FINAL BUDGET FOR 2024
CODIFIED IN STATUTE, CONFIRMED
BY THE EXECUTIVE VIA SIGNATURE
AND FINALIZED BY THE CITY
COUNCIL. EACH OF THESE FORECAST
WILL BE PREPARED AND PRESENTED
BY THE INDEPENDENT OFFICE OF
THE OFFICE OF ECONOMIC AND
REVENUE FORECAST, AND FOLLOWING
INTO OUR DISCUSSIONS HERE, WE
WILL MAKE SURE THAT WE REPEAT
THE INFORMATION AND SEATTLE CIT
COUNCIL'S FINANCE AND HOUSING
COMMITTEE. THIS IS AN
OPPORTUNITY FOR US TO BOTH
DIVIDE IMMEDIATE TRANSMITTAL O
THE INFORMATION TO THE MEMBERS
OF THE PUBLIC, TO MEMBERS OF TH
COUNCIL, AND TO OUR CITY FAMILY
AT LARGE. BY HAVING THESE
QUARTERLY MEETINGS PRESENTED VI
SEATTLE CHANNEL, THANK YOU VER
MUCH, SEATTLE CHANNEL, AND
MAKING SURE THAT ALL MEMBERS OF
THE PUBLIC AS WELL HAVE THE
INFORMATION IN REAL TIME. WE
THEN OFFERED THE CHANCE TO HAVE
ADDITIONAL INFORMATION PROVIDED
BY THE CITY BUDGET'S OFFICE VIA
DIRECTOR JULIE DINGLEY, AND WE
HAVE CENTRAL STAFF'S ANALYSIS
INC., AS WELL, AT THE SEATTLE
CITY COUNCIL MEETING. WE HAVE
COMMITTED TO MAKING SURE THAT
EACH OF OUR QUARTERLY MEETINGS
ARE FOLLOWED BY THAT ROBUST
VISITATION THAT INCORPORATES
WHAT WE HAVE HERE. ANY
ADDITIONAL INFORMATION FROM THE
CITY BUDGET'S OFFICE AND THE
REVENUE STREAMS WHICH THEY ALSO
TRACK, WHICH NOT ALL REVENUE
STREAMS GO THROUGH OFFICE OF
ECONOMIC REVENUE FORECAST, SO W
COMBINE ALL OF THEIR RESOURCES
TOGETHER AND PROVIDE AN ANALYSI
FROM CITY COUNCIL'S CENTRAL
STAFF TO ENSURE THAT THERE IS A
ROBUST DISCUSSION AND WE
GREATLY APPRECIATE THE
INDEPENDENT OFFICE THAT WE'VE
CREATED THIS TWO YEARS AGO TO
INCREASE TRANSPARENCY AROUND TH
CITY'S REVENUE FORECASTING
PROCESS TO ENSURE, AS WELL, THA
THERE'S NO POLITICAL INFLUENCE
ON THE REVENUE FORECAST
THEMSELVES, AND TO MAKE SURE
THAT THE EXECUTIVE AND
LEGISLATIVE BRANCH GET THE
INFORMATION IN REAL TIME
TOGETHER, SO THAT WE CAN
COLLECTIVELY LEARN WHAT THE
REVENUE PROCESS IS, AND WE CAN
COLLECTIVELY BEGIN ASSESSING
WHAT STRATEGIES TO ADDRESS IT,
WHETHER IT'S GOOD OR BAD. GIVEN
THE REVENUE FORECAST EFFECTIVEL
SET THE FINANCIAL CONSTRAINTS
FOR THE OVERALL BUDGET PROCESS,
IT'S IMPORTANT TO MAKE SURE THA
WE HAVE PROVIDED THIS
INFORMATION IN A TRANSPARENT AN
ACCOUNTABLE WAY TO ALL OF US
AND ESPECIALLY TO THE PUBLIC.
BEFORE WE MOVE ON TO ANY
SUBSTANTIVE ITEMS, I WANTED TO
THANK YOU ALL FOR JOINING
TODAY'S MEETING AND FOR BEING
PART OF THIS PROCESS. AGAIN I
WANT TO THANK OUR REVENUE
FORECAST MEMBERS HERE TODAY ,
FINANCE AND ADMINISTRATIVE ,
EXCUSE ME, THE FAS INTERIM
DIRECTOR JANIE CARNELL, OUR VIC
CHAIR WHO IS ALSO SENIOR DEPUT
MAYOR MONISHA HERRELL, AND THAN
YOU AS WELL EXECUTIVE BRANCH
REPRESENTATIVE FROM COUNCIL
PRESIDENT LAWRENCE'S OFFICE,
BRENDEL SMITH. ANYTHING ELSE
BEFORE WE GET INTO TODAY'S
MEETING? HEARING NOTHING, I
MOVED TO ADOPT TODAY'S AGENDA.
IS THERE A SECOND?
>> SECOND.
>> THANK YOU SO MUCH SENIOR
DEBBIE MAYOR. IF THERE IS NO
OBJECTION, TODAY'S AGENDA WILL
BE ADOPTED. THERE ARE NO
OBJECTIONS. TODAY'S AGENDA IS
ADOPTED. A COPY OF THE MINUTES
FROM THE MARC 9th 2023 MEETING
HAVE BEEN CIRCULATED AND IT IS
ALSO POSTED ONLINE. THANK YOU
AGAIN TO DIRECTOR NOBLE AND HIS
TEAM FOR MAKING SURE THAT THE
WEBSITE, THE BRAND-NEW WEBSITE
THAT WE LAUNCHED LAST YEAR IS
CONSTANTLY UPDATED, AND IT IS.
IT'S ALSO BEEN CIRCULATED TO
MEMBERS OF THIS COMMITTEE. IS
THERE ANY MOTION TO APPROVE TH
MINUTES FROM LAST MEETING?
>> I MAKE A MOTION TO APPROVE
THE MINUTES FROM THE MARCH 9th
MEETING.
>> THANK YOU SENIOR DEPUTY
MAYOR. IT HAS BEEN MOVED. IS
THERE A SECOND?
>> SECOND.
>> THANK YOU VERY MUCH, CHIEF O
STAFF BRENDEL SMITH. IS THERE
ANY DISCUSSION? NO DISCUSSION,
ALL IN FAVOR, PLEASE SAY I.
>> AYE.
>> ANY OPPOSED? ANY
ABSTENTIONS? OKAY. THE MEETING
MINUTES ARE APPROVED
UNANIMOUSLY. LET'S GET INTO THE
SUBSTANCE OF TODAY'S AGENDA.
AGENDA ITEM NUMBER TWO IS A
PRESENTATION OF THE APRIL 2023
ECONOMIC AND REVENUE FORECAST
AND RECOMMENDATIONS FROM THE
OFFICE OF ECONOMIC AND REVENUE
FORECAST REGARDING THE 2023-202
BUDGET. EXCUSE ME, REGARDING
THE 2023 AND 2024 REVENUE
FORECAST. WE WILL NOT BE
BUDGETING IN TODAY'S MEETING.
PROBABLY TO THE RELIEF OF
DIRECTOR NOBLE, WHO IS AT THE
OFFICE OF REVENUE FORECAST. SO
THIS IS JUST FOCUSED ON THE
REVENUE PROJECTIONS FOR TODAY.
WE ARE GREATLY APPRECIATIVE OF
THE OPPORTUNITY FOR THIS
PRESENTATION TODAY. IT'S GOING
TO BE LED BY THE FORECAST
COUNCIL OFFICE. I WANT TO
ENCOURAGE FOLKS, AS YOU HAVE
QUESTIONS, PLEASE GO AHEAD AND
RAISE YOUR QUESTIONS THROUGHOUT
OBVIOUSLY DENSE INFORMATION
EVERY TIME WE MEET. THIS
PRESENTATION IS GOING TO PROVID
A SUMMARY OF BOTH THE ECONOMIC
CONDITIONS IN THE PROJECTED CIT
REVENUES TO ENSURE THAT THE CIT
FORECAST IS FULLY INFORMED AND
ABLE TO HAVE ITS FULL RANGE OF
QUESTIONS ADDRESSED FROM CITY
STAFF. I REALLY APPRECIATE YOU
ALL PARTICIPATING, AND THAT
INCLUDES MEMBERS OF THE SEATTLE
CITY COUNCIL CENTRAL STAFF AND
ALSO THE CITY'S BUDGET OFFICE
WHO ARE HERE WITH US AS WELL ,
ENCOURAGE YOUR PARTICIPATION. W
RECOGNIZE THAT THERE'S FOUR
VOTING MEMBERS OF THIS COUNCIL
BUT YOU ARE COLLECTIVELY THE
HOLE THAT MAKES UP THE
INFORMATION THAT WE RECEIVE AND
HELP DIGEST IT, SO PLEASE DO
JOIN IN WITH ANY QUESTIONS THE
PRESENTATION IS GOING TO INCLUD
A FORMAL RECOMMENDATION AT THE
END, WHICH THE OFFICE OF REVENU
FORECAST WILL BE OFFERING
REGARDING THE FORECAST THAT WE
ARE ABOUT TO GO THROUGH. AS A
REMINDER, IT'S A ROLL OF HIS
COUNCIL TO RECEIVE THE
INFORMATION. WE CAN CONFIRM OR
REJECT THE RECOMMENDATION. IF W
REJECT WE NEED TO COLLECTIVELY
WORK ON HOW WE WILL ADDRESS
THAT. BUT IT IS JUST A
RECOMMENDATION THAT COMES FROM
THE FORECAST COUNCIL OFFICE AND
WE THE FOUR VOTING MEMBERS
CONFIRM OR REJECT IT. AFTER THE
PRESENTATION, WE WILL HAVE THE
OPPORTUNITY TO DISCUSS THE
REVENUE FORECAST AND MAKE THAT
DETERMINATION. FOR NOW, JUST
BEFORE WE LAUNCH IN, ARE THERE
ANY ADDITIONAL OPENING COMMENTS
OR QUESTIONS FROM MY COLLEAGUES
I'M NOT HEARING ANY. WELCOME
BACK TO THE STAGE, DIRECTOR
NOBLE. YOUR TEAM HAS BEEN BUSY.
THANK YOU VERY MUCH IN ADVANCE
FOR THE MATERIALS THAT YOU
PROVIDED, AND I'LL HAND IT OVER
TO YOU.
>> THANK YOU VERY MUCH. MUCH
APPRECIATED, AND AGAIN, IT HAS
REALLY BEEN A TEAM EFFORT, BOTH
WITH MY COLLEAGUES HERE FROM TH
FORECAST OFFICE, BUT ALSO STAFF
WITH THE CITY COUNCIL AND ALSO
THE BUDGET OFFICE. WITH THAT,
I'LL PUT UP A POWERPOINT AND
BEGIN THIS PRESENTATION.
>> IT'S SO MUCH EASIER TO SEE
YOU IN THIS FORMAT. SO THANKS
FOR THE UP CLOSE OPTION TODAY .
I KNOW YOU HAVE A WHOLE TEAM
WITH YOU, SO THANKS TO THEM AS
WELL.
>> SOME OF THAT WAS INTENTIONAL
AND SOME OF IT NOT, SO THERE YO
GO. THIS IS THE APRIL FORECAST.
YOU CAN SEE THE POWERPOINT, JUS
SO I CAN CONFIRM. EXCELLENT.
OKAY. I'VE GOT TO FIGURE OUT
HOW TO ADVANCE THE SLIDE,
HITTING THIS BUTTON. SO JUST
GOING TO GIVE YOU A BRIEF
OVERVIEW OF THE OUTLINE HERE. W
ARE GOING TO START WITH AN
UPDATE ON ECONOMIC DEVELOPMENTS
THAT HAVE OCCURRED SINCE
NOVEMBER. SO IT'S BEEN A FULL
FIVE MONTHS SINCE WE DISCUSSED
BOTH THE NATIONAL AND REGIONAL
ECONOMY IN DETAIL. WE MET LAST
MONTH TO REVIEW YEAR-END
REVENUES BUT WE DIDN'T FOCUS ON
THE ECONOMY. PART ONE IS REALLY
WHAT'S HAPPENED IN THE LAST FIV
MONTHS, BECAUSE AS YOU WILL SEE
IT, IT HAD A SIGNIFICANT IMPACT
BOTH ON THE SORT OF MEDIUM
REVENUES AND ON OUR LONGER-TERM
FORECAST. AND THEN PART TWO IS
ACTUALLY TO LOOK AT THE ECONOMI
FORECAST. SO WE DO ECONOMIC
FORECAST FOR THE REGION ON THIS
TEAM AND THEN WE USE THAT AS TH
BASIS FOR THE REVENUE FORECAST.
OUR OWN REGIONAL FORECAST IS IN
TURN INFORMED BY A NATIONAL
FORECAST. PART TWO ESSENTIALLY
SHIFT TO LET'S LOOK FORWARD AN
WE'LL REVIEW WHAT HAPPENED IN
THE PAST FIVE MONTHS. WHAT'S
EXPECTED IN THE NEXT FEW MONTHS
AND THE NEXT FEW YEARS? THAT
INCLUDES A REVIEW OF THE
NATIONAL FORECAST FROM IHS
MARKET, WHICH IS OUR PRIMARY
NATIONAL FORECASTER, AND THEN
AGAIN, ALSO THE RESULT OF OUR
REGIONAL MODEL . THEN LET'S
SHIFT TO PART THREE, ACTUALLY
TALKING ABOUT THE REVENUES
THEMSELVES, BOTH THE GENERAL
FUND AND OTHER SIGNIFICANT
REVENUE SOURCES INCLUDING THE
JUMPSTART PAYROLL TAX AND REIT
BOTH OF WHICH WILL BE A
SIGNIFICANT POINT OF DISCUSSION
TODAY. WE'LL ALSO REVIEW SOME O
THE TRANSPORTATION REVENUES
DEDICATED TO TRANSPORTATION
REVENUES, AS WELL. SO DIVING
INTO THE ECONOMIC DATES AND
RECENT DEVELOPMENTS, AT THE
BROADEST STROKES, THINGS HAVE
IMPROVED SINCE WE LAST MET BUT
IT IS THE NATURE OF AN ECONOMIS
TO ALWAYS BE SOMEWHAT CAUTIOUS.
RISKS TO REMAIN AND WE'LL SEE
THAT IN SOME WAYS THE
LONGER-TERM FORECAST IS LESS
ROSY THAN IT WAS. BUT IN TERMS
OF DEVELOPMENTS IN THE PAST FEW
MONTHS, WHAT WE SEEN IS JOB
GROWTH CONTINUES QUITE STRONGL
THROUGH THE LAST PART OF 2022
AND INTO THE EARLY PART OF 2023
WE'LL SEE SOME GRAPHICS ON THIS
LATER, BUT THE ORIGINAL
FORECAST, THE NOVEMBER FORECAST
HAD BEEN FOR A MILD RECESSION T
BE TAKEN HOLD AT THIS POINT, AN
FOR EMPLOYMENT TO BE DECLINING.
WE'VE SEEN EXACTLY THE OPPOSITE
BOTH AT THE NATIONAL LEVEL AND
THE REGIONAL LEVEL, AS WELL.
INFLATION WAS ALSO THE HEADLINE
NEWS WHEN WE LAST MET AND YOU
RECALLED IT WAS RUNNING ABOVE 7
1/2% AT THAT TIME, 7.7%. IT HA
COME DOWN FROM THE 9.1% IN
JUNE. THOSE ARE NATIONAL
FIGURES. BUT IT WAS STILL QUITE
HIGH. AS OF FEBRUARY IT'S DOWN
TO 6%, AND AS NOTED HERE, WHAT'
PARTICULARLY ENCOURAGING IS
THAT'S NOW EIGHT MONTHS IN A RO
OF DECLINE. SO INFLATION IS
BEING BROUGHT DOWN, IF NOT
SOMEWHAT SLOWLY. AND SO THAT
PART IS GOOD . SO WE ARE GETTIN
JOB GROWTH AND PRICES ARE COMIN
DOWN. THAT HAS THE FLAVOR OF A
SOFT LANDING, AND WE TURN TO
THAT NOTION THAT HAD BEEN THE
GOAL FOR THE FED AND FOR OTHER
NATIONAL LEVEL POLICYMAKERS.
THAT SAID, THOUGH, THERE ARE
RISKS OUT THERE. SO IN MARCH
THERE WAS A FAILURE OF THE
SILICON VALLEY BANK AND
SIGNATURE BANK, AND THAT RAISE
AWARENESS ABOUT THE FINANCIAL
STRESS ON THE BANKING SYSTEM,
AND WE'LL COME BACK TO THAT AS
WELL, AND CHANGES THAT ARE BEIN
MADE THERE IN TERMS OF INTERES
RATES AND LENDING POLICIES. AND
I SHOULD NOTE THAT THE FORECAST
THAT UNDERLIES THE NATIONAL
FORECAST AND UNDER THE EYES OUR
REVENUE ESTIMATES WAS DEVELOPE
BEFORE THE BANK FAILURES. THAT
WAS A PARTICULAR POINT OF
CONCERN FOR THE WEEK OR TWO
IMMEDIATELY AFTER. AS WE MOVE
FORWARD FROM THAT, THERE'S A
SENSE THAT THOSE RISKS HAVE BEE
MITIGATED, BUT THEY'RE OUT
THERE. THE OTHER RISKS, THE
HIGH INTEREST RATES HAVE HAD A
DRAMATIC IMPACT ON REAL ESTATE
MARKETS. WE'LL SEE THAT WHEN WE
GET TO REVENUES, AND THAT SOME
CONCERN ABOUT HOW THAT MIGHT
OTHERWISE SPREAD. IT'S ALSO
INCREASED THE COST OF INVESTMEN
IN GENERAL, NOT JUST FOR REAL
ESTATE BUT FOR THE KINDS OF
BUSINESS EXPANSION. AND THEN
THERE'S CONCERN THAT THE LABOR
MARKET, WE ARE GETTING THIS
GOOD JOB PERFORMANCE, WHICH IS
GOOD THING AT SOME LEVEL. BUT I
ALSO MEANS THAT THERE IS
CONTINUED PRESSURE ON THE WAGE
SIDE AROUND INFLATION, AND GIVE
THE FED'S COMMITMENT TO REDUCIN
INFLATION, THAT -- IF WAGES
CONTINUE TO INCREASE AT A HIGH
LEVEL, THAT COULD CREATE
PRESSURES THAT WOULD LEAD TO
FURTHER INTEREST RATE INCREASES
AND THEN ANOTHER POINT , JUST
BECAUSE THE NEXT TIME WE MEET,
THIS ISSUE COULD BE EITHER
RESOLVED OR IN KIND OF THE
HOTTEST OF DISCUSSION, THE
CONGRESS NEEDS TO RAISE THE DEB
CEILING AT SOME POINT THIS YEAR
PROBABLY OVER THE SUMMER. AND
THE NERVOUSNESS AROUND THE
FAILURE OF SVB AND SIGNATURE
BANK HIGHLIGHTS THE FRAGILITY I
THE FINANCIAL MARKETS, AND DEBT
CEILING FIGHT COULD MAKE THAT
WORSE VERY QUICKLY. AGAIN, SOM
OF THE RISKS, JUST TO HIGHLIGHT
THEM, AS WELL. IN SOME WAYS
WHAT'S HAPPENED IN THE PAST FEW
MONTHS IS THAT THE WORK THAT
THE FED UNDERTOOK HAD THE
OUTPUTS AND THE EFFECTS THAT
THEY WERE HOPING FOR, AND THAT'
WHAT'S HIGHLIGHTED HERE, WE
WANTED TO TALK ABOUT FOR A
MOMENT. SO THE ORANGE LINE HERE
ON THE LEFT IS THE FEDERAL FUND
RATE. THAT'S THE INTEREST RATE
THAT THE FED HAS BEEN
INCREASING. SO I LIKE TO THINK
IN SOME WAYS IT'S CAUSAL AND
HAVING EFFECTS ON THE OTHER TWO
LINES. THE BLUE LINE IS THE 30
YEAR MORTGAGE RATE. THAT IS WHA
THE INTEREST PEOPLE ARE PAYING
IF THEY ARE GOING TO BUY A NEW
HOME. ACTUALLY IN OUR LAST
MEETING, SENIOR DEPUTY MAYOR
HARRELL HAD ASKED ABOUT THIS
RELATIONSHIP. SO WE THOUGHT IT
WAS GOOD TO BRING THIS BACK AND
SHOW YOU THAT IN FACT AS THE
FEDERAL FUNDS RATE HAS BEEN
INCREASING, THE 30 YEAR
MORTGAGE RATE HAS BEEN
INCREASING. AND IN FACT, WHEN W
LAST MET WE SHOWED YOU THAT
THERE HAD BEEN A REALLY
SIGNIFICANT TURN IN THE LOCAL
REAL ESTATE MARKET IN THE LATE
SUMMER , WHICH DOES CORRESPOND
WITH THIS RATHER SIGNIFICANT
INCREASE IN INTEREST RATES THAT
HAPPENED MID TO LATE LAST YEAR.
I'M NOT SAYING THE TIMING WAS
DIRECT, BUT CLEARLY YOU CAN SEE
THAT RELATIONSHIP BETWEEN THE
FED RATE AND THE MORTGAGE RATES
SIMILARLY IN RELATIONSHIP, THE
LAST LINE HERE IS NATIONAL
INFLATION, AND YOU CAN SEE THAT
THE FED HAS RAISED INTEREST
RATES AND INFLATION IS IN FACT
COMING DOWN. SO THIS HAS BEEN
THE GOAL LAND AT SOME LEVEL IT'
WORKING. THE OTHER EFFECT, IN
SOME WAYS THE GOAL OF THIS HAD
BEEN TO COOL THE ECONOMY
OVERALL. ONE WAY TO MEASURE THA
IS WITH EMPLOYMENT CHANGES, SO
JOB CREATION IS WHAT'S ACTUALLY
ILLUSTRATED MOST SPECIFICALLY
HERE ON THE RIGHT. AND THIS
STARTS AT THE BEGINNING OF
JANUARY OF LAST YEAR. ONE THING
YOU'LL NOTE AS WE GO THROUGH TH
PRESENTATION TODAY, A LOT OF OU
GRAPHS ARE ANCHORING TOWARD
JANUARY OF LAST YEAR. WE HAD I
PAST MUCH OF LAST YEAR. WE'VE
BEEN USING THE BEGINNING OF THE
PANDEMIC IS KIND OF A BENCHMARK
TO MEASURE CHANGE FROM. I SAY W
MOVED AWAY FROM THAT BECAUSE IN
PART THE CHANGES WERE SO STEEP
IMMEDIATELY AFTER THAT IT
DISTORTS THE GRAPH AND YOU DON'
REALLY GET TO SEE THE KIND OF
RESOLUTION OF WHAT'S HAPPENING
RECENTLY. I THINK ALSO, BECAUSE
AT THIS POINT, IT'S REALLY
DRIVING THE ECONOMY IS NOW THE
RESPONSE TO THE STIMULUS. SO
IT'S REALLY THE FED TRYING TO
COOL OFF THE STIMULUS THAT CAME
AS A RESULT OF THE PANDEMIC. SO
THE DRIVER RIGHT NOW IS NO
LONGER AS MUCH THE PANDEMIC AS
IT IS THE POLICY RESPONSES TO
THE PANDEMIC. SO AGAIN, ANCHORE
IN 2022, STRONG JOB GROWTH
THROUGH THE FIRST HALF OF LAST
YEAR. AND I PUT A QUESTION MAR
ON THIS ARROW. ONE COULD ARGUE
THERE WAS A TREND DEVELOPING
THROUGH THE SECOND HALF OF LAST
YEAR, TOWARDS THE JOB MARKET
COOLING AND LESS JOB CREATION.
THAT WAS A TREND. IT WAS
OBVIOUSLY INTERRUPTED IN JANUAR
AND FEBRUARY, WITH SOME REALLY
STRONG, AND AGAIN SOMEWHAT
SURPRISING FROM WHAT HAD BEEN
FORECAST PERSPECTIVE. REALLY
STRONG JOB GROWTH NUMBERS. THAT
ALSO MAY EXPLAIN WHY THE FED WA
WILLING TO ADD ADDITIONAL
QUARTER-POINT ON THE FED RATE
EVEN IN THE FACE OF THE BANKING
CRISIS OF LAST MONTH, BECAUSE
AGAIN, THEY WERE TRYING TO COOL
DOWN THE LABOR MARKET. THE MARC
RESULTS ARE FROM LAST FRIDAY.
I'LL GET THEM BACK UP YOUR. SO
THAT'S VERY CURRENT, AND AGAIN,
IT SHOWS THAT MAYBE WE ARE BACK
UNDER THIS TREND OF COOLING THE
ECONOMY IN A WAY THAT IS
DESIRED, AND AGAIN , THIS NOTIO
OF A SOFT LANDING WHERE WE'LL B
ABLE TO COOL THE ECONOMY, STILL
ACTUALLY HAVE JOB CREATIONAND
ANYWAY, MINIMIZE JOB LOSSES, BU
BRING IN PATIENT BACK UNDER
CONTROL. SO FAR WHAT THE FED
HAS BEEN TRYING TO DO HAS BEEN
HAPPENING. THE BANKING CRISIS
WAS A SIDE EFFECT AND ONE
CONCERN, BUT AT THE MOMENT LOOK
TO HAVE BEEN MANAGED, AS WELL.
DO ALTHOUGH WANT TO HIGHLIGHT
THAT IN THE LAST FIVE MONTHS
THERE HAVE BEEN DEVELOPMENTS ON
THE REGIONAL SIDE THAT POINT TO
SOME ISSUES OF LONGER-TERM
CONCERN, AND YOU'LL SEE THEM I
THE FORECAST. BUT I THINK IN
SOME WAYS I'M GOING TO
ILLUSTRATE SOME FACTS THAT I
THINK WE ARE ALL AWARE OF, AND
JUST WANTED YOU TO SEE WHAT THE
REALLY LOOK LIKE IN TERMS OF TH
RECENT HISTORY, AND IN
PARTICULAR THE POINT IS ABOUT
THE IMPORTANCE OF THE TECHNOLOG
SECTOR ON OUR REGIONAL ECONOMY.
OVER THE PAST ON THE LEFT HERE
THE PAST 10 YEARS, AND TELLING
YOU HOW THE CHANGES IN THAT
MARKET ARE ALREADY MANIFESTING
THEMSELVES IN THE LOCAL ECONOMY
OVER HERE ON THE LEFT, STARTING
IN JANUARY OF 2013 AS A
BENCHMARK, THAT'S INDEXED TO
THAT YEAR, WE ARE TRACKING
GROWTH IN THE INFORMATION AND
PROFESSIONAL BUSINESS SERVICES
SECTORS. SO THIS IS REALLY WHER
THE TECHNOLOGY, THE LIKES OF
AMAZON AND APPLE AND MICROSOFT
AND META/FACEBOOK, THIS IS
WHERE THEIR EMPLOYMENT LIVES, I
YOU WILL. AND THE BLUE LINE IS
THE NATIONAL ECONOMY. AND IF YO
TRACK FROM JANUARY OF 2013 TO
JANUARY OF 23, OBVIOUSLY THE
NOTABLE INTERRUPTION OF THE
PANDEMIC. YOU'RE LOOKING AT
ABOUT 25% JOB GROWTH IN THAT
SECTOR. SIGNIFICANT OVER 10
YEARS. BUT IF YOU'RE LOOKING FO
A GREEN LINE, THAT'S SEATTLE.
OVER THAT SAME TIME PERIOD WE'V
HAD 60% GROWTH IN THOSE SECTORS
AND AGAIN IN A WAY WE ALL
UNDERSTAND, REALLY DRIVEN VERY
SPECIFICALLY BY TECHNOLOGY. AND
ITS MAY BE A STRETCH TO READ IT
BUT I THINK WE ARE ALL READING
LOCAL HEADLINES. THIS CURVE DOE
IN FACT FLATTEN OVER THE SECOND
HALF OF LAST YEAR, AND WE'LL
SEE THIS IN A MOMENT IN SOME
EMPLOYMENT DATA. THE REDLINE IS
THE STATE. YOU CAN SEE HOW TO
SOME DEGREE SEATTLE HAS CARRIED
THE STATE WITH IT WITH THIS
TREMENDOUS GROWTH IN THE
TECHNOLOGY SECTOR. I THINK
WE'VE BEEN ENJOYING THIS PERIOD
OF A DECADE-PLUS, AND EVEN THER
WAS A DROP DURING THE PANDEMIC
BUT THE GROWTH RATE IMMEDIATELY
PICKED UP AFTER. THINK ABOUT TH
SLOPE OF THIS LINE WAS PRETTY
STEADY HERE. IT DROPPED BECAUSE
OF THE PANDEMIC BUT THEN IT
PICKS BACK UP AND IT'S ONLY NOW
BEEN FLATTENING OUT. AND TO
ILLUSTRATE SOME NOTION OF
FLATTENING OUT, ON THE RIGHT IS
ONE WAY TO MEASURE JOB OPENINGS
IN PREVIOUS TECHNOLOGY
GENERATIONS, IF YOU WILL, THERE
WAS EFFORTS TO MEASURE THE
COLUMN INCHES IN JOB LISTINGS I
NEWSPAPERS. THE SORT OF A MORAL
EQUIVALENT THESE DAYS MIGHT BE
THE NUMBER OF LISTINGS ON
WEBSITES. SO INDEED.COM IS THE
ONE SHOWN HERE, AND IT'S TAKEN
BEGINNING OF LAST YEAR IS THE
BEGINNING POINT BECAUSE IT PUT
THE PERCENT CHANGE IN THE NUMBE
OF JOB LISTINGS. SO SOME MEASUR
OF HOW -- OF JOB PROSPECTS AND
POTENTIAL JOB GROWTH. USING THE
NATIONAL LEVEL, THINGS HAVE
COOLED OFF SOMEWHAT OVER THE
PAST ROUGHLY 15 MONTHS. BUT
THEN SEATTLE, IT'S BEEN A MORE
RAPID CHANGE. SO THE LABOR
MARKET HERE IN TERMS OF JOBS
THAT GET LISTED ON SOMETHING
LIKE INDEED HAS BEEN COOLING
SOMEWHAT FASTER. SO AGAIN, THIS
NOTION THAT RISKS TO OUR REGION
ARE SOMEWHAT DIFFERENT AND
ARGUABLY HIGHER THAN THEY ARE A
THE NATIONAL LEVEL. SOME OTHER
PLACES WE SEE THAT -- BE NECK
JUST ON THAT LAST SLIDE, I WANT
TO ADD AN EDITORIAL COMMENT.
IT'S REALLY IMPORTANT THAT THOS
TWO SLIDES BE SHOWN TOGETHER,
RIGHT? BECAUSE I THINK IF
SOMEONE WERE TO JUST LOOK AT TH
SLIDE ON THE RIGHT AND NOT
REALIZE THAT WAS ONE WAY TO
MEASURE A LEVELING OUT VERSUS A
DECLINE, A LEVELING OUT OF JOBS
POSTED, IT WOULD BE DISINGENUOU
AND ALMOST REPRESENTING THE
FULLER PICTURE. SO I JUST WANTE
TO ADD THAT EDITORIAL COMMENT,
THAT THESE ARE IMPORTANT SLIDES
TO PUT TOGETHER.
>> A GREEK. KIND OF SET THE
GENERAL FLAVOR THAT WE HAVE
RELIED ON TECHNOLOGY GROWTH
WHERE IT HAS BEEN A DRIVER OF
THE LOCAL ECONOMY FOR A
DECADE-PLUS, AND THERE IS REASO
TO THINK THAT GOING FORWARD IT
WANT BE THE SAME DRIVER THAT
IT'S BEEN, AND WE'LL SEE HOW
THAT COULD MANIFEST. SOME OTHER
ONES, AND AGAIN, SOME OTHER
PLACES WHERE IT COULD MANIFEST.
SO THE CHART ON THE LEFT, THIS
ONE DOES START AT THE BEGINNING
OF THE PANDEMIC, SHOWING OFFIC
VACANCY RATES. WE HAD VERY LOW
VACANCY RATES IN SEATTLE. IT'S
ONE OF THE REASONS THERE WERE,
EVEN THROUGH THE PANDEMIC THERE
WERE OFFICE BUILDINGS GETTING
CONSTRUCTED. THEY'VE BEEN PUT
INTO THE PROCESS AND GROUND HAD
BEEN BROKEN AHEAD OF THE
PANDEMIC, ANTICIPATING THAT WE
WOULD CONTINUE TO GROW. THE
BLUE LINE IS THE NATIONAL
NUMBER. AGAIN, IT WAS MORE --
10% VACANCY IS NOT UNUSUAL AS A
EQUILIBRIUM POINT. SO VACANCY
RATES HAVE BEEN GOING UP AS BOT
-- LARGELY AROUND THE WORK FRO
HOME ISSUE. AND YOU CAN SEE THA
IN THE LOCAL AREA, THEY'VE GONE
UP VERY SIGNIFICANTLY. AND IN
FACT, THERE WAS AN ARTICLE IN
YESTERDAY'S SEATTLE TIMES
RAISING THE FLAG ABOUT POTENTIA
DISTRESS IN THE LOCAL OFFICE
MARKET BECAUSE OF THE LEVEL OF
VACANCY. ONE OF THE THINGS IN
DOING SOME RESEARCH ON THIS,
PRIVATE FORECAST WORK , WE COME
TO UNDERSTAND TALKING TO SOME
BROKERS THAT SOME OF THE LARGE
TEXT FIRMS ACTUALLY HAD MORE
THAN ENOUGH OFFICE SPACE AS THE
PANDEMIC HIT, AND EVEN BEYOND,
BECAUSE THEY HAD BEEN
CONSTRAINED OVER TIME BY A LACK
OF OFFICE SPACE. THEY COULDN'T
GROW AS MUCH AS THEY WANTED
BECAUSE IN PAST YEARS THEY
HAVEN'T HAD SUFFICIENT SPACE.
THEY ACQUIRED MORE THAN THEY
NEEDED, SO AT THE MOMENT,
THERE'S A GLUT, BOTH BECAUSE
THEY ARE NOT REACHING THE HIRIN
LEVELS THAT THEY HAD THOUGHT,
AND BECAUSE OF THE WORK FROM
HOME ISSUES THAT WILL AGAIN COM
UP. SO CONCERN ABOUT WHERE THE
LOCAL OFFICE MARKET MAY BE
GOING, AND THAT MATTERS TO US
BECAUSE OFFICE -- CONSTRUCTION
OF OFFICE BUILDINGS IS A
SIGNIFICANT SOURCE OF REVENUE.
WE -- MATERIALS ARE TREATED --
THE SALES TAX ON MATERIALS
HAPPENS AT THE SITE. THOSE ARE
MULTIPLE HUNDRED MILLION DOLLAR
PROJECTS. AND THEIR AREN'T
UNDERWAY AND WE DON'T ANTICIPAT
THAT THEY WILL BE GOING FORWARD
THE GRAPH ON THE RIGHT IS HOME
PRICES. FROM THE OFFICE SIDE NO
MORE TO THE RESIDENTIAL AND
INDIVIDUAL SIDE . IT SHOWS HOME
PRICES, THE GREEN IS SEATTLE,
THE BLUE IS THE NATION, AND
AGAIN, THIS JUST CHANGES FROM
JANUARY OF LAST YEAR. SO
SOMEWHAT HARD TO RECALL BUT
THROUGH THE FIRST HALF OF LAST
YEAR, HOUSING PRICES IN THIS
AREA CONTINUE TO
>> DIRECTOR NOBILE, WE LOST YOU
AT --
>> AFFORDABLE CRISIS.
>> DIRECTOR NOBILE, WE LOST YOU
AT THEN AGAIN. COULD YOU BACK U
TWO OR THREE SENTENCES? I THINK
THAT IT WENT ON MUTE WHEN YOUR
CAMERA CHANGED. IF YOU COULD GO
BACK TO THEN AGAIN. JUST A FEW
SENTENCES.
>> SURE. NOT SURE EXACTLY WHERE
SO I'M GOING TO --
>> YOU STARTED -- YOU WERE
STARTING TO EXPLAIN THE HOUSING
PRICES MAP THAT WE STARTED OUT
THIS IS JUST FROM JANUARY 22.
COVER EVERYTHING AFTER THAT.
>> PERFECT, THANK YOU. REWIND,
PLAY. THIS CHART SHOWS HOUSING
PRICES SINCE JANUARY OF LAST
YEAR, AND WHAT YOU CAN HARD TO
SEE, HARD TO HER NUMBER, REALL
DRAMATIC INCREASE IN SEATTLE
THROUGH HALF OF THE YEAR,
ALMOST 15%. THE BLUE LINE IS TH
NATION, AND HOUSING PRICES WERE
INCREASING THERE, AS WELL. THE
SECOND HALF OF LAST YEAR,
DRAMATIC TURN. BUT MORE DRAMATI
HERE THAN THE NATION AS A WHOLE
AND AT ONE LEVEL, THIS MIGHT BE
GOOD NEWS. WE DO HAVE A HOUSING
AFFORDABILITY CRISIS, SO LOWER
HOUSING PRICES IS ONE WAY TO
HELP ADDRESS THAT. BUT ON THE
OTHER HAND, FROM A KIND OF
PERSONAL ECONOMIC PERSPECTIVE,
FOLKS WHO OWN THOSE HOUSES ARE
SEEN A SIGNIFICANT DROP IN THAT
ASSET VALUE THAT THEY THOUGHT
THEY REACHED LAST YEAR , AND
THERE'S A PHRASE IN ECONOMICS
THAT THE ECONOMY IS A CONFIDENC
GAME. IT DEPENDS A LOT ON
CONSUMER CONFIDENCE, AND THAT
THESE ARE THE KINDS OF CHANGES
THAT CAN SHAKE THAT CONFIDENCE
AND LEAD TO MORE CONSERVATIVE
PURCHASING PRACTICES, WHICH IN
THEMSELVES CAN LEAD TO A SLOWER
ECONOMY. SO I'M FOCUSING AGAIN
JUST TO EMPHASIZE THIS AND YOU
CAN SEE WHAT THIS LOOKS LIKE ON
THE EMPLOYMENT SIDE, AND AGAIN
THERE'S KIND OF A MIXED MESSAGE
PART OF THIS. SO THIS IS
SHOWING A CHART OF EMPLOYMENT
CHANGES BY SECTOR SINCE THE
MIDDLE OF LAST YEAR. SO JUST
JUNE OF LAST YEAR. IN PART
BECAUSE THAT'S REALLY WHERE YOU
GET TO SEE THE POINT WE ARE
MAKING HERE ABOUT INFORMATION
AND TECHNOLOGY. BUT THE GOOD
NEWS IS YOU'VE CREATED ALMOST
60,000 JOBS, AND THIS WAS AS O
A MONTH AGO, ITSELF. SO IT WILL
BE TRAILING. ALMOST 60,000 JOB
ACROSS A WIDE VARIETY OF
SECTORS, LED IN SOME WAYS --
LED BY LEISURE AND HOSPITALITY.
THAT SECTOR CONTINUING TO
RECOVER. BUT NOT JUST THAT ONE.
BUT ON THE OTHER HAND, WE SEE I
THE DATA FOR THE FIRST TIME ,
THE LAYOFFS IN THE TECHNOLOGY
SECTOR. AND IN SOME WAYS YOU SE
THAT TWO PLACES. YOU SEE THAT I
THIS INFORMATION LINE HAVING
GONE RED, SO 6000 JOB LOSS IN
THE INFORMATION SECTOR. THE
OTHER PLACE WE START TO SEE IT
SOME WAYS INDIRECTLY IS THAT
PROFESSIONAL AND BUSINESS
SERVICES, SO THE THIRD LINE
DOWN. THAT'S THE OTHER PLACE
WHERE THE TECHNOLOGY SECTOR IS
REPRESENTED, AND OBVIOUSLY IT'S
GROWING, BUT THAT THE SECTOR
HAD BEEN GROWING REALLY
SIGNIFICANTLY OVER THE PAST FEW
YEARS, AND REALLY CARRIED US
THROUGH THE PANDEMIC. SO THE
FACT THAT IT'S SLOWING DOWN ITS
GROWTH IS IN ITSELF
SIGNIFICANT. SO AGAIN, LOCAL
ECONOMY CONTINUES TO GENERATE
JOBS, BUT NOT IN ALL SECTORS.
AND THAT WOULD BE -- THE
FORECAST REALLY CALLS FOR THAT
GOING FORWARD, SO WE'LL SEE A
RETREAT IN INFORMATION AND
PROFESSIONAL BUSINESS SERVICES.
BUT GROWTH ELSEWHERE . DO YOU
JUST WANT TO HIGHLIGHT QUICKLY
THAT THERE WERE ALSO LOSSES IN
THE FINANCIAL ACTIVITY SECTOR.
THIS IS AGAIN THE EFFECTIVE
INTEREST RATES. THIS IS THE
FED'S WORK KIND OF BEEN
DEMONSTRATED. FEWER PEOPLE
REFINANCING MORTGAGES. FEWER
PEOPLE TAKING OUT CAR LOANS AND
THE LIKE. PEOPLE WHO WORK IN
THAT AREA , FEWER THAN NEEDED.
WE ARE SEEING THE KIND OF
PATTERN THAT ONE MIGHT EXPECT,
ONE THAT DEPENDING ON HOW LONG
IT CONTINUES COULD BECOME A
CONCERN. SO THAT'S REALLY WHAT
I'M GOING TO HIGHLIGHT IN TERMS
OF WHAT IS CHANGED SINCE WE LAS
MET. I THINK THAT WHEN WE WERE
MEETING IN NOVEMBER AND TALKING
ABOUT THE ECONOMY, THE CONCERNS
OF THE TECHNOLOGY SECTOR WERE
THERE BUT THEY REALLY BECOME
MORE CLEAR AND ACTUALLY IN TERM
OF ACTUAL LAYOFFS HAVE BECOME
MORE APPARENT OVER THE LAST FIV
MONTHS. SO HAS THE PERSISTENT
WORK FROM HOME. AGAIN, WE'LL
TALK ABOUT THAT , AS WELL.
BEFORE I MOVE ON TO THE NATIONA
AND REGIONAL FORECAST, ANY
QUESTIONS ABOUT THAT EARLY FIRS
SET OF SLIDES? NOT SEE MANY,
I'M GOING TO PUSH FORWARD AND
TALK ABOUT THE FORECAST AND
COMPARISONS. SO I'M GOING TO
TALK FROM A PICTURE HERE AT TH
RIGHT AND I THINK I'LL COVER
MOST OF THE NARRATIVE THAT'S ON
THE LEFT. SO THE TWO KIND OF
PEACH OR LIGHTER COLORED LINES
ARE THE BASELINE FORECASTS . TH
ONE THAT'S LABELED PREVIOUS IS
THE FORECAST FROM -- IT'S A
NOVEMBER FORECAST. IT'S THE ONE
I PRESENTED IN NOVEMBER. AND TH
OTHER HIGHER ONE AT THIS POINT
IS THE CURRENT BASELINE, AND TH
DARKER DASHED LINE IS THE TURN
PESSIMISTIC. TALKING FIRST FROM
THIS PREVIOUS BASELINE, WHEN WE
MET WITH YOU LAST NOVEMBER,
POTENTIALLY THE FORECAST WAS
SAYING THAT THE EXPECTATION WAS
THAT WE REACHED THE EMPLOYMENT
HIGH FOR THE CURRENT CYCLE AND
WE ARE EXPECTING A MODEST
RECESSION. THESE ARE NATIONAL
LEVEL FORECAST. DECLINE IN
EMPLOYMENT THROUGH THIS YEAR AN
THEN RETURN THE GROWTH IN EARL
2024. THAT'S REALLY WHAT THAT
LOWER LINE WAS ALL ABOUT, AND I
FIT OUR REVENUE FORECAST. WHAT
HAPPENED SINCE IS THAT WE ARE
DESCRIBING IN THAT FIRST LINE
THINGS THAT HAVE GONE WELL. I
SHOULD'VE SAID, THIS IS NOW ALS
INDEXED BACK TO THE BEGINNING O
LAST YEAR. FOCUSED REALLY ON
WHAT'S HAPPENING RECENTLY AND
INTENTIONAL FOCUS THAT WAY .
WHAT HAPPENED IN THE LATTER PAR
OF 2022 AND THIS EARLY PART OF
2023 IS THE JOB GROWTH HAS
CONTINUED IN CONTRADICTION TO
THAT PREVIOUS BASELINE FORECAST
WHAT HAS HAPPENED, HOWEVER, IS
SLOWING IN CERTAIN SECTORS,
TECHNOLOGY AMONG THEM. ALSO A
SENSE, YOU'LL SEE IT, HIGHER
INTEREST RATES AND HIGHER
INFLATION WILL PERSIST A LITTLE
LONGER. SO THE FORECAST FULLY
ACKNOWLEDGES THE EMPLOYMENT
INCREASES THAT HAPPENED IN THE
PAST FIVE MONTHS. STILL, THE
FED'S EFIRD HAVE TAKEN HOLD,
WILL TAKE HOLD, WE SAW THAT IN
THOSE EMPLOYMENT NUMBERS. SO
WHAT'S PROJECT DID IS A MINOR
DECLINE IN EMPLOYMENT, THE GDP
OUTPUT SIDE IS ESSENTIALLY FLAT
BASICALLY 0% GROWTH IN GDP.
WE'LL SEE THAT LATER IN THE
FORECAST. YOU GET DECLINING
EMPLOYMENT, FLAT GDP , BECAUSE
THERE'S AN INCREASE IN
PRODUCTIVITY. BUT IT'S A VERY
DIFFERENT FORECAST. IT'S A
FORECAST THAT ACKNOWLEDGES THE
GROWTH THAT HAS OCCURRED, BUT
IS ANTICIPATING SOMEWHAT SLOWER
GROWTH GOING FORWARD, AND WE'LL
SEE WHAT THAT SLOWER GROWTH
LOOKS LIKE IN TERMS OF REVENUES
AS WELL. AND JUST TO HIGHLIGHT,
THERE IS THIS ONGOING CONCERN
PARTICULARLY ABOUT THE WAR IN
UKRAINE CONTINUING TO ESCALATE
AND COMMODITY PRICES SPIKING,
AND HIGHER INFLATION LEADING TO
MORE AGGRESSIVE ACTIONS BY THE
FED , POTENTIALLY. THERE IS A
PESSIMISTIC SCENARIO THAT HAS
RELATIVELY LOWER PROBABILITY
THAN IN THE PAST YEAR AND A
HALF, BUT WOULD BE SIGNIFICANT
WOULD REPRESENT A SIGNIFICANT
DOWNTURN. SHIFTING THEN TO LOO
AT THE INFLATION FORECAST. THE
COLOR SCHEME HERE IS THE SAME S
THE TWO LIGHTER PEACH COLORED
ARE THE BASELINE FORECAST. THE
PREVIOUS ONE BEING A LOWER LINE
SO WE ARE EXPECTING INFLATION T
DROP SOMEWHAT MORE QUICKLY THA
IS NOW FORECAST, AND THAT'S
CONSISTENT, WE'VE SEEN INFLATIO
COME DOWN BUT CORE INFLATION AN
SOME MEASURES HAVE PROVEN
SOMEWHAT PERSISTENT, BUT IT'S
COME DOWN, BUT NOT AS QUICKLY A
BEEN EXPECTED AND THE FORECAST
AGAIN IS FOR IT TO PERSIST
SOMEWHAT. THE PESSIMISTIC AGAIN
FORECAST IS BASED ON THE NOTION
THAT INFLATION WITH THE WAR IN
UKRAINE AND SUPPLY CHAIN ISSUES
AND OTHER EFFECTS, A BANKING
CRISIS WASN'T ANTICIPATED IN
THIS PESSIMISTIC SCENARIO, BUT
IT'S THE KIND OF THING THAT
COULD OBVIOUSLY DRIVE A BAD
OUTCOME, IF YOU WILL. THAT PAR
IS LARGELY UNCHANGED. SOMEWHAT
HIGHER INFLATION WILL HAVE AN
EFFECT ON THE REVENUE FORECAST,
AS WELL, WHICH WE WILL POINT OU
WHEN WE GET THERE IN JUST A FEW
SLIDES. SO OUR REGIONAL
FORECAST, AND HERE JUST FOCUSIN
AGAIN ON EMPLOYMENT IS INFORME
A GREAT DEAL BY THE NATIONAL
FORECAST AND REFLECTED
SIGNIFICANTLY, ALTHOUGH OUR
FORECAST IN TERMS OF EMPLOYMENT
IS ACTUALLY SOMEWHAT STRONGER .
OUR LOCAL ECONOMY HAS BEEN
SOMEWHAT STRONGER AGAIN OVER TH
PAST FEW MONTHS. SO AGAIN, THE
SAME PATTERN AT THE NATIONAL
LEVEL. OUR RADIUS WORK HAS
ANTICIPATED THAT WE ARE GOING T
ENTER AND WOULD HAVE ENTERED, I
YOU WILL, A PERIOD OF MODEST
EMPLOYMENT DECLINE. THERE'S
GOING TO BE A MILD RECESSION,
TWO QUARTERS OF MILD DECLINES
AND THEN A RETURN TO GROWTH IN
THE BEGINNING OF 2024. AND THEN
PUTTING ROBUST GROWTH. YOU THIN
ABOUT THE SLOW RATE OF INCREAS
OF EMPLOYMENT ON THE MEDIA
SPACE. THAT WAS QUITE STRONG.
ANTICIPATION NOW IS THAT WE
PRODUCED A LOT OF JOBS BUT THE
EXPECTATION IS THAT OVERALL
EMPLOYMENT IN THE REGION WILL B
ROUGHLY FLAT FOR AN EXTENDED
PERIOD OF TIME. AND AGAIN,
THAT'S A REFLECTION OF JOB
LOSSES IN SOME SECTORS AND JOB
GAINS IN OTHERS. BUT NOT THE
SAME STEADY LEVEL OF GROWTH
THAT IN THE PAST DECADE HAS
PARTICULARLY BEEN DRIVEN BY THE
TECHNOLOGY SECTOR. SO OUR
BASELINE FORECAST ACKNOWLEDGES
THE GROWTH THAT OCCURRED BUT IS
EXPECTING THINGS TO BE MODEST T
FLAT GOING FORWARD. AND THE
PESSIMISTIC FORECAST , MIRRORIN
THAT OF THE NATIONAL ONE COULD
BE A STEEP DECLINE WOULD SET I
AND UKRAINE ESCALATES AGAIN.
IT WASN'T THE RISK THAT WAS
MODELED AND ANOTHER ONE COULD B
A DOWNTURN IN THE FINANCIAL
SECTOR THAT PEOPLE WERE NERVOU
ABOUT AS SVB CRASHED. SO THAT'
THE REGIONAL FORECAST . WILL
KNOW THE THINGS WE NEED TO DO
FOR YOU IS TO MAKE A
RECOMMENDATION THAT THE
BASELINE, THE PESSIMISTIC OR TH
OPTIMISTIC. AT THE SAKE OF NOT
HAVING A TOO CLUTTERED PICTURE,
I DIDN'T PUT UP THE OPTIMISTIC
SCENARIOS THERE . THEY'RE NOT
SYMMETRIC SO THE OBVIOUS
SCENARIOS ARE NOT AS MUCH OF AN
UPSIDE AS THE DOWNSIDE
REPRESENTED BY THE PESSIMISTIC.
BUT AGAIN, OUR SENSE IS THAT
THE BASELINE IS MORE LIKELY THE
RIGHT PLACE TO GO. BUT BEFORE I
REACH THAT SPECIFIC CONCLUSION,
I WANTED TO GIVE YOU A SENSE OF
HOW WE THINK ABOUT THAT
JUDGMENT. BEFORE I DO THAT, I
NOTICED THAT THERE IS A QUESTIO
FROM TOM MIKE CELL. TOM?
>> GOOD MORNING, THANKS FOR
GIVING ME THE OPPORTUNITY TO AS
A QUESTION. JUST TRYING TO SEE
IF I'M UNDERSTANDING THIS
CORRECTLY. THE INFLATION
FORECAST BY IHS INSIGHT IS
HIGHER THAN THE WALL STREET
JOURNAL ADVANTAGE, AND THIS IS
FOR 2023?
>> LET ME TAKE A MOMENT TO
DESCRIBE THIS OVERALL PICTURE.
OUR GOAL IN THIS SLIDE IS TO PU
-- IHS MARKET IS OUR PRIMARY
FORECASTER. WE'VE USED THEM FOR
A COUPLE DECADES, AND THEY FEED
OUR REGIONAL MODEL. WE RECENTLY
STARTED TO BUY SOME FORECAST
SERVICES FROM MOODY'S
ANALYTICS. WHEN WE DID OUR
FORECAST ACCURACY PRESENTATION
LAST FALL, WE NOTED THAT IHS
HAS A PATTERN OF BEING SOMEWHAT
CONSERVATIVE. YOU'LL SEE IT
REPRESENTED HERE AGAIN. SO WE
THOUGHT IT WOULD BE WORTH AT
LEAST SEEING WHAT OTHER FOLKS
ARE FORECASTING, AS WELL. SO WE
HAD MOVIES SPECIFICALLY AS
ANOTHER FORMAL FORECAST, AND I
ADDITION TO THE WALL STREET
JOURNAL, THERE'S A SURVEY OF
FORECASTING ECONOMISTS AND
PRESENTS THE RESULTS OF THAT
SURVEY. SO THAT'S WHAT'S
REPRESENTED HERE. FOR FOUR KEY
ECONOMIC MEASURES , THAT'S THE
FIRST ONE . THE FEDERAL FUNDS
RATE, THAT'S THE REAL RATE.
REAL GDP GROWTH AND THE
UNEMPLOYMENT RATE, WALL STREET
JOURNAL MEASURES THESE FOUR AS
A SUMMARY AND AN AVERAGE. THE
BLUE DOT HERE IS THAT AVERAGE.
THAT'S SORT OF THE CONSENSUS IF
YOU WANT TO MEASURE CONSENSUS
THAT WAY. THE REDLINE IS IHS AN
THE YELLOW , THE RED DOT, AND
THE YELLOW IS MOODY'S. WHAT
YOU'LL SEE AS WE GO THROUGH HER
IS THAT IHS IS ON THE
CONSERVATIVE OR ON AVERAGE SID
FOR EACH OF THESE MEASURES. SO
IN PARTICULAR ON INFLATION, THE
ARE MARGINALLY -- WHAT'S
FORECAST HERE IS WHAT HAPPENS
AT THE END OF THIS YEAR. THEY
HAVE TO PICK A POINT AND DO THE
COMPARISON. SO AT THE END OF
THIS YEAR, THE IHS FORECAST FOR
INFLATION IS SOMEWHAT HIGH,
PROBABLY ABOUT A QUARTER POINT
HIGHER THAN THE WALL STREET
AVERAGE AND THE MOODY'S
ANALYTICS PREDICTION. ON THE
FED FUNDS RATE, THEY'RE ALL
ABOUT THE SAME. LOOKS LIKE IT'S
ABOUT 4 3/4. LET'S ANTICIPATE
HERE, BY EVERYBODY NOW, THAT TH
FED WILL INCREASE ANOTHER
QUARTER POINT, POTENTIALLY AS
SOON AS THEIR NEXT MEETING. BUT
THAT WILL HAVE THE DESIRED
EFFET AND LATER IN THE SUMMER
THEY WILL START TO BACK OFF, SO
THAT BY YEAR-END WILL GO DOWN
FROM 5 1/4 TO 4.75. REAL GDP
GROWTH -- GO AHEAD, TOM.
>> THANKS, DIRECTOR NOBLE. I'M
REALLY KEEN ON THE INFLATION
BECAUSE I THINK I NOTICED IN A
PRIOR SLIDE THAT THE ADJUSTMENT
FOR THE CURRENT YEAR INFLATION
EXPECTATION WAS ACTUALLY LOWER
THAN WHAT WAS EXPECTED IT IN TH
OCTOBER FORECAST . SO I'M
CURIOUS IF INFLATION IN 2022 AN
2023 IS PERHAPS LOWER THAN WHAT
WAS ANTICIPATED WHEN FORECAST
WERE DONE, PARTICULARLY WITH
REGARDS TO THE EXPENDITURE
BUDGET, JUST BECAUSE IT MAY BE
USEFUL FOR MAYOR OR COUNCIL TO
UNDERSTANDING THE CONTEXT OF TH
BIANNUAL BUDGET HOW INFLATION
FACTORED INTO DEVELOPING THE
EXPENDITURE BUDGET. AND EVEN
THOUGH INFLATION IS STILL HIGH,
WHETHER OR NOT IT'S LOWER THAN
IT WAS WHEN THE BUDGET WAS BEIN
DEVELOPED.
>> I'M GOING TO REMIND IF
INFLATION IS UP OR DOWN. IT'S
NOT VERY -- I'M GOING TO GO
BACK A FEW SLIDES. SO THIS IS
THE NATIONAL FORECAST AND OUR
REGIONAL ONE IS ABOUT THE SAME,
SO THE CURRENT FORECAST I
BELIEVE IS MARGINALLY HIGHER ON
INFLATION, ACTUALLY, AND WE ARE
LOOKING IT UP AS WE SPEAK. SO
HERE -- IT'S HERE . I STAND
CORRECTED, IT IS DOWN SLIGHTLY.
DOWN ABOUT A QUARTER POINT ON
FORECAST BASIS. BUT I THINK IT
MAY -- WHETHER IT TAILS OFF OVE
THE LONG RUN AS QUICKLY IS ALSO
A SEPARATE QUESTION SO LOWER
423, IS IT LOWER FOR 24 AND 25
AND BEYOND, I WANT TO TAKE A
HARDER LOOK. BUT WE WILL GET
BACK BECAUSE IT'S OBVIOUSLY A
VERY GOOD QUESTION. RETURNING
TO THIS, AGAIN, FEDERAL FUNDS
RATE, EVERYBODY BASICALLY
AGREES. REAL GDP GROWTH,
MOODY'S . ONE THING I NOTICE IS
THE RANGE OF DISAGREEMENT HERE
IS BETWEEN -- LARGELY BETWEEN
WHETHER WE ARE GOING TO GET 1%
DECLINE IN GDP OR 1%, MAYBE 1
1/2% GROWTH. WE'RE IN A VERY
NARROW RANGE OF VERY LITTLE
GROWTH, EVEN AT BEST, IF YOU
WILL. IHS AGREES WITH MOODY'S,
WHICH IS ESSENTIALLY PREDICTING
KNOW, OR VIRTUALLY NO GDP
GROWTH. AGAIN, IT'S THIS NOTIO
OF FLAT. FLAT ECONOMY. MOVIES I
SOMEWHAT MORE OPTIMISTIC, BUT
EVEN THERE, LOOKING AT 1% GDP
GROWTH. SO AGAIN, NOT THE SAME
LEVEL OF RAPID RECOVERY THAT
WE'VE SEEN OVER THE PAST COUPLE
YEARS. AND ON UNEMPLOYMENT,
AGAIN, IHS IS SOMEWHAT MORE
CONSERVATIVE BUT NOT
TREMENDOUSLY SLOW. THESE ARE
KIND OF TWOFOLD BECAUSE THERE
ARE TWO THINGS THAT DRIVE
UNEMPLOYMENT. ONE IS NUMBERS
GETTING HIGHER BUT THE ALSO HO
MANY ARE IN THE WORKFORCE. AND
ONE OF THE THINGS WE ARE SEEING
IS SOME FOLKS RETURNING TO THE
WORKFORCE WHO HAD DROPPED OUT S
THERE IS INCREASING LABOR
PARTICIPATION RATE IS THE
MEASURE SIGNIFICANTLY. BUT
BOTTOM LINE, KIND OF OVERALL,
IS THAT MOODY'S IS SOMEWHAT
CONSERVATIVE OR ON THE AVERAGE
THIS IS THEIR BASELINE FORECAST
SO IT'S ONE OF THE REASONS WE
ARE COMFORTABLE WITH THEIR
BASELINE, AND THAT'S REALLY THI
NEXT SLIDE. SO WHAT IS OUR
RECOMMENDATION WITH REGARD TO
THE ECONOMIC SCENARIO AND THE
ANSWER IS TO COME TO THE
CONCLUSION, FOR THE BASELINE, T
JUST REALLY QUICK TALK ABOUT
WHY. THE FORECAST REFLECTS WHA
WE ARE ALL READING ABOUT AND
SEEING, WHICH IS THE TECHNOLOG
SECTOR IS SLOWING. AGAIN, AS W
JUST SHOWED IN THE PREVIOUS
SLIDE, OUR NATIONAL FORECAST WE
THINK IS PRETTY REPRESENTATIVE.
ANOTHER KEY POINT THAT IS
NECESSARILY GOING TO BE GOOD
NEWS FROM A FORECAST
PERSPECTIVE, I THINK IT'S
IMPORTANT TO RECOGNIZE THAT WHE
WE WERE WITH YOU LAST MONTH, WE
SHOWED YOU BOTH THE JUMPSTART
PAYROLL TAX AND REVENUES, WE
MISSED OUR FORECAST. THEY
UNDERPERFORMED. AND AS YOU'LL
SEE IN THE NEXT FEW SLIDES, WIL
BE ABLE TO MODEL THAT
UNDERPERFORMANCE AND MAKES
ADDICTIONS WE THINK ARE
CONSISTENT WITH THAT REALIZED
UNDERPERFORMANCE. SO WE ARE NOT
BEING ROSIE, IF YOU WILL, IN
PLACES WHERE IT WOULD BE
INAPPROPRIATE. SO IN THAT
CONTEXT, AGAIN, THIS IS A
DISCUSSION FOR YOU AS THE NEXT
ITEM. WE ARE RECOMMENDING THE
BASELINE SCENARIO, AND THE
REVENUE AREAS WE ARE GOING TO
SHOW FROM HERE ARE LARGELY THE
BASELINE SCENARIO ONES. SO THAT
WILL BE -- THE NEXT MOVE WOULD
BE TO START TALKING THROUGH THE
REVENUE SLIDES THEMSELVES. SO
BEFORE I DO THAT, I ALSO MAKE
SURE THERE AREN'T ANY QUESTIONS
BECAUSE WE WILL DIG INTO THIS
AND PUT UP A SHEET WITH LOTS AN
LOTS OF NUMBERS ON IT, AND WALK
YOU THROUGH IT SLOWLY.
>> PLEASE GO AHEAD.? I HAVE A
QUESTION ABOUT THE -- ON PAGE
12, THAT CURRENT BASELINE
ASSUMES PLATEAUING OF
EMPLOYMENT GROWTH. AND YET THE
INFORMATION AND TECHNOLOGY
SECTOR SEEMS TO BE GOING DOWN.
HOW ARE THOSE TWO RECONCILED?
>> IT'S A FAIR QUESTION, AND TH
ANSWER IS THAT THERE WILL BE
DECLINES. THE APPLICATION IS
THERE WILL BE DECLINES IN SOME
SECTORS IN GROWTHS AND OTHERS.
SO IT'S GOING TO BE A SHIFT AND
FROM A FINANCIAL PERSPECTIVE AN
ECONOMIC PERSPECTIVE, SOME JOBS
ARE WORTH MORE OR PAY MORE. ONE
OF THE THINGS WE DO TRACK IS
KIND OF THE AGGREGATE INCOME A
THAT BECOMES A KEY DRIVER. BUT
THAT'S THE EXPECTATION. AGAIN,
WE'VE SEEN LAYOFFS IN THE
TECHNOLOGY SECTOR. WHAT IN SOM
WAYS CONCERNS ME MORE FROM A
LONGER-TERM PERSPECTIVE IS THE
CONNECTION OF HOW MUCH GROWTH
ARE WE GOING TO GET? THERE ARE
LOTS OF REASONS WHY THE
TECHNOLOGY, WELL ANY SECTOR WIL
WANT TO TRY TO RETAIN WORKERS I
THEY THINK THERE IS GOING TO BE
A RECOVERY RELATIVELY SOON. SO
IT'S NOT THAT WE ARE EXPECTING
CONTINUED WAVE AFTER WAVE OF
LAYOFFS, BUT RATHER, WE'VE GONE
FROM AN ENVIRONMENT WHERE THAT
SECTOR WAS LEADING OUR GROWTH B
EXPANSION, TO ONE WHERE THEY
WILL BE A LOW LEVEL OF LAYOFFS
OR MODEST GROWTH, AND THAT WILL
HAVE A SIGNIFICANT IMPACT ON
REVENUES. BUT THE BOTTOM LINE I
LAYOFFS IN SOME SECTORS, HIRING
IN OTHERS.
>> IS IT FAIR TO SAY THAT THE
PLATEAUING EFFECT -- THE
PLATEAUING WOULD BE HAPPENING
DUE TO LOWER WAGE JOB GROWTH --
LOWER WAGE JOBS GROWING?
>> I WOULDN'T -- THE TECHNOLOG
SECTOR TENDS TO HAVE THE HIGHES
WAGES. BUT FOR INSTANCE, BOEIN
HAS HAD AN UPTURN IN ITS
PRODUCTION, AND THOSE CAN BE
HIGHER-PAYING JOBS AS WELL. SO
DON'T THINK IT'S AS SIMPLE AS
THAT. BUT IT IS AGAIN, ONE OF
THE REAL DYNAMICS HERE IS THAT
NOT ONLY WAS WE WERE GETTING
TREMENDOUS JOB GROWTH IN THE
TECHNOLOGY SECTOR, THOSE JOBS
ARE WELL COMPENSATED AND BECOME
REAL DRIVERS TO THE ECONOMY IN
TERMS OF CONSUMPTION AND
GENERATES SERVICES AND OTHER
AREAS.
>> YOU'RE PROJECTING THOSE TO
SLOW DOWN?
>> EXACTLY. SO ESSENTIALLY,
YEAH. EXACTLY THAT. SO AGAIN,
I MOVE ON TO THE ACTUAL REVENUE
NUMBERS HERE. AND AGAIN, THIS
SLIDE IS ALWAYS THE MOST
COMPLICATED BECAUSE IT HAS LOT
AND LOTS OF NUMBERS. I'M GOING
TO START AND TAKE OUR TIME TO
WALK THROUGH THIS. 2022, THIS I
JUST SHOWING THE ACTUALS
CONSISTED WITH THOSE THAT WERE
REPORTED LAST MONTH. THE NEXT
COLUMN OVER, THIS IS THE 2023
ADOPTED FORECAST. THIS IS THE
REVENUES THAT WERE PART OF THE
BUDGET. 2023, THIS IS THE
UPDATED FORECAST FOR 2023. THIS
IS THE NEW APRIL FORECAST AND
THIS COLUMN IS GOING TO CHANGE
WHAT'S THE CHANGE IN REVENUES?
OVERALL YOU CAN SEE, I'M GOING
TO DO 2023 AND THEN 2024.
OVERALL THERE IS A SIGNIFICANT
INCREASE OF MORE THAN $70
MILLION WITH SOME IMPORTANT
CAVEATS, AND IN PARTICULAR, IF
YOU TAKE OUT GRANT REVENUES, AN
WE'LL TALK A LITTLE BIT ABOUT
THE GRANTS. I THINK FROM
UNDERSTANDING AVAILABLE
REVENUES, IT'S WORTH TAKING A
LOOK AT SEPARATING OUT THE
GRANTS. BECAUSE GRANTS WERE
ACCEPTED FOR VERY SPECIFIC
OPUSES, AND IN THIS CASE,
ACTUALLY THERE'S EXPENDITURE
ALREADY CARRIED FORWARD. SO IF
THEY'RE NOT REALLY NOTHING
REVENUES THAT ARE AVAILABLE TO
THE CITY IN A GENERALIZED SENSE
BUT LET'S WALK DOWN HERE AND
LOOK WAS CHANGING. AND I WILL
HIT ON SOME OF THESE, AND LEAN
ON STAFF, AND DAVE AND ALEX
FROM THE BUDGET OFFICE TO
POTENTIALLY COME ON SOME OTHERS
ON PROPERTY TAX, PROPERTY TAXES
DUE LEAVE THE MOST EASILY
PREDICTED. YOU DON'T USUALLY SE
SIGNIFICANT CHANGE HERE AND
ARGUABLY LESS THAN 2 1/2 MILLIO
DOLLARS ON A BASE OF $400
MILLION IS NOT MUCH CHANGE. BUT
WHAT'S GOING ON HERE IS NOT IN
THE CITY'S BASE PROPERTY TAXES
BUT RATHER IN THE MEDIC ONE
LEVY. FOR SIMPLICITY, THIS LINE
HAS ALWAYS BEEN REPORTED AS
PROPERTY TAX INCLUSIVE OF THE
DIRECT REVENUES TO GENERAL FUND
FROM THE CITY'S PROPERTY TAX
LEVIES. BUT ALSO OUR SHARE OF
THE MEDIC ONE LEVY. AND AWAY TH
MEDIC ONE LEVY REVENUES ARE
ALLOCATED BASED ON THE SHARE OF
THOSE REVENUES THAT ARE
GENERATED IN THE CITY. BECAUSE
THE RELATIVE SIZE OF OUR
ASSESSED VALUE TO THE REST OF
THE COUNTY HAS DECLINED FOR
2023, SO EVERYBODY'S VALUES WEN
UP A LITTLE BIT. BUT THE REST O
THE COUNTY'S WENT UP BY MORE
THAN HOURS. SO OUR SHARE OF
THOSE MEDIC ONE REVENUES
DECLINES. THOSE ARE DISTRIBUTED
BY THE COUNTY. SO THAT'S WHAT
THAT THE CLIENT IS THERE. RETAI
SALES UP ABOUT 3%. I COULD USE
SOME QUICK MATH. A COUPLE OF
FACTORS HERE. ONE IS THAT WE
FINISHED 2022 AHEAD OF OUR
FORECAST, SO THE BASE IS
SOMEWHAT HIGHER. IN SOME SENSE
OUR FORECASTS ARE REALLY ABOUT
GROWTH, HOW MUCH GROWTH OR LOS
OF GROWTH, IF YOU WILL, ARE WE
GOING TO GET? SO A HIGHER BASE
HAS A TENDENCY TO INCREASE THE
2023 FORECAST. AND ALSO WE HAD
THESE REALLY STRONG JOB
PERFORMANCE EVEN INTO THE FIRST
PART OF THIS YEAR. SO THAT
DRIVES UP THOSE REVENUES. SO
THAT'S ON THE RETAIL SALES SIDE
YOU KNOW MUCH OF THE SAME STORY
I DON'T KNOW, JOHN, IF YOU'D
LIKE TO ADD ANYTHING THERE.
>> ONE OF THE ISSUES IS THE
INFLATION ISSUES . SO HIGHER
INFLATION, THE LATTER PART OF
LAST YEAR, INCREASING THE
NOMINAL VALUE. SO SOME OF THIS
INCREASE -- I'M GOING TO MAKE
THIS POINT VERY CLEARLY AND A
SLIDE COMING UP ABOUT THE
LONGER-TERM GROWTH AND THE
EFFECTS OF INFLATION. BUT AGAIN
THE HIGHER BASE FOR 2022, AND
THEN SOME INITIAL STRONG
PERFORMANCE IN 23. THE PRIVATE
UTILITY TAX CHANGE, THE PHONE
REVENUES DID NOT FALL OFF AS
QUICKLY AS LAST YEAR AS WE WERE
CONCERNED BY. OTHER CHANGES HER
ARE PRETTY SMALL . PARKING
METERS DOWN SLIGHTLY. COURT
FINDS DOWN MORE SIGNIFICANTLY.
PERHAPS DAVE ENNIS CAN COMMENT
ON EITHER OR BOTH OF THOSE , OR
ALEX.
>> SURE, I CAN DO THAT PURCHASE
THE PARKING METERS IS DOWN
BECAUSE OF A DECREASE IN PAID
OCCUPANCY. 6.6% DROP IN PAID
OCCUPANCY. FROM PRIOR
EXPERIENCE. SO NOT A -- IT'S
ACTUALLY A REALLY LARGE
PROPORTION. IT TIES INTO THE
NEXT THING, WHICH IS COURT
FINES, WHICH THAT $5 MILLION
DROP THERE. COURT FINES RIGHT
NOW IS A VERY DYNAMIC AREA. AN
SO IT'S A QUESTION OF WHAT IS
NORMAL AND WHAT IS
EXTRAORDINARY, AND WHAT IS
EXTRAORDINARY RIGHT NOW IS WE
HAD REFUNDS IN 2022, AND THEN
WE ALSO HAVE CURRENTLY GOING ON
HIS NOTIFICATIONS HAVE BEEN SEN
OUT ON THE COLLECTION, THE
AGGREGATE NUMBER OF CITATIONS
THAT WERE WRITTEN OVER SINCE TH
PANDEMIC BEGAN, RIGHT? AND THEY
ARE SENDING NOTIFICATIONS TO
RECEIVE PAYMENTS, AND PEOPLE AR
PAYING. SOME PEOPLE ARE PAYING.
BUT IT'S A LITTLE HARD TO
PREDICT AT THIS MOMENT HOW
THAT'S ALL GOING TO PAY OUT.
WEATHER -- WILL IT BE 5% PAY
AND 95% OF THOSE CITATIONS GO T
COLLECTIONS, OR WILL IT BE 25%
PAY? THERE'S A LOT OF
VARIABILITY IN THIS FORECAST,
AND I WOULD SAY THAT IT'S ON TH
UPSIDE, THAT WE MIGHT HAVE
BETTER PERFORMANCE THAN WAS
INDICATED HERE. BUT ANYWAY, YO
GOT THE REFUNDS, YOU'VE GOT THE
NOTIFICATIONS. AND IT'S JUST
DOWN TO BASIC FORECASTING, WHIC
IS ONE OF THE EXPECTATIONS
VOLUMES WHICH IS TIED INTO
ENFORCEMENT LEVELS, WHICH TIES
BACK TO PARKING METERS, ABOUT
PAID OCCUPANCY BEEN DOWN. ONE
POSSIBILITY THAT PAID OCCUPANCY
IS DOWN BECAUSE ENFORCEMENT IS
LESS THAN IT HAS BEEN
PREVIOUSLY, SO PEOPLE ARE JUST
NOT PAYING WHEN THEY GO TO THE
LEADERS. SO ANYWAY, THERE IS A
VERY CONNECTED STORY HERE. BUT
THINK THAT'S THE BASICS.
>> THANK YOU, DAVE. MOVING DOWN
NEXT SIGNIFICANT CHANGES AROUND
GRANTS, AND IF YOU RECALL WE DI
THE PRESENTATION LAST MONTH THA
GRANT REVENUES HAD BEEN LESS
THAN EXPECTED IN 2022, AND IN
SOME WAYS THIS IS THE FLIPSIDE
OF THAT SAME COIN. SO WHAT WE
HAD SAID IS WITH GRANT
REVENUES, UNTIL THE WORK IS
DONE, YOU CAN'T BUILD THE GRANT
WE EXPECTED THE MONIES WOULD
BECOME PART OF THE 2023
FORECAST. THERE'S EVERY REASON
TO THINK THE CITY WOULD EARN
THOSE REVENUES ULTIMATELY. SO
THAT'S LARGELY WHAT'S REFLECTED
HERE. THAT'S FOR A SET OF
SERVICES THAT WE AGREED TO
PERFORM. SO BALANCE TRANSFERS
UP SLIGHTLY. DAVE OR ALEX ONCE
TOLD ME, NOW I FORGOT.
>> THE FUND BALANCE TRANSFER,
THAT'S MAINLY A REVENUE
REPLACEMENT TRANSFER THAT WAS
INTENDED TO HAPPEN IN 2022, BUT
BECAUSE OF THE WAY THAT THEY'R
BEING CAREFUL ABOUT MOVING IT O
WHATEVER, IT'S NOT GOING TO
HAPPEN UNTIL 2023.
>> THE OTHER SIGNIFICANT CHANGE
IS IN LICENSE AND PERMITS AND
THAT'S LARGELY THE FLIPSIDE OF
SOMETHING WE SAW AT THE END OF
THE YEAR REPORT. SO BUSINESS
LICENSE REVENUES AND
UNDERPERFORMED RELATIVE TO OUR
FORECAST, AND WHAT WAS GOING ON
THERE IS THAT FOLKS CAN RENEW
THEIR BUSINESS LICENSE LATE ,
TYPICALLY DO IT LATE IN THE YEA
BEFORE. USUALLY WE GET A LOT OF
LICENSE RENEWAL IN NOVEMBER AND
DECEMBER, AND THAT REVENUE IS
FOR LOTS OF HISTORIC REASONS ,
IS COUNTED ON A CASH BASIS. SO
THIS YEAR WHAT HAPPENED IS NOT
AS MANY FOLKS RENEWED IN
DECEMBER, AND THEY HAVE SINCE
RENEWED IN JANUARY. SO WE EXPEC
THAT'S REALLY SORT OF A SHIFT I
TIME, WITH A WHOLE LOT OF NEW
REVENUE TO THE CITY. BUT THE
BOTTOM LINE, YOU ADD THAT ALL
UP, $72 MILLION. IF YOU TAKE OU
THE GRANT AGAIN, THERE IS GOOD
REASON TO SORT OF THINK OF IT A
A SEPARATE THING. IT'S ABOUT A
$45 MILLION INCREASE. SO STILL
SIGNIFICANT, DRIVEN IN NO SMALL
PART BY RETAIL SALES AND
STRONGER PERFORMANCE, AND
PREDICTED STRONG PERFORMANCES
GOING FORWARD. BUT WHAT YOU SEE
AND I'M GOING TO SHIFT TO 2024
-- YOU HAVE A QUESTION?
>> JUST BEFORE YOU MOVE ON, I
WANTED TO FLAG THAT DIRECTOR
DINGLEY HAS HER HAND UP, TOO.
>> NO PROBLEM. I CAN WAIT UNTIL
YOU'RE DONE. GO AHEAD.
>> I WILL DO THAT QUICKLY. I'M
NOT GOING TO GO THROUGH EACH AN
EVERY ONE OF THESE, BECAUSE A
LARGE PART OF WHAT YOU ARE
SEEING IS THE FOLLOW-ON EFFECT
FROM WHAT WE DESCRIBED
PREVIOUSLY. I WOULD NOTE THAT
SOMETIMES THE GOOD NEWS
COMPOUNDS IN THESE THINGS VERY
DIRECTLY AND YOU SEE LESS OF
THAT, SO THE INCREMENTS IN 2024
ARE IN SOME CASES SMALLER, AND
THAT HAS TO DO WITH THE NOTION
OF PLATEAUING GROWTH. WE ARE
PREDICTING LESS OVERALL GROWTH
INTO 2024 THAN WE HAD
PREVIOUSLY. BUT THE INCREASE T
THE GENERAL FUND OF LLION, GRAN
SHARE THEIR , SO OVER THE TWO
YEARS $97 MILLION TOTAL. BUT W
THINK OF A GENERAL FUND,
EFFECTIVELY 67.1 THE NEXT SLID
I WANT TO TALK MORE ABOUT THE
LONGER-TERM IMPACTS. BEFORE
THAT, DIRECTOR DINGLEY HAS A
QUESTION.
>> THANK YOU. THANK YOU VERY
MUCH. YOU ACTUALLY GOT TO THE
PART OF WHAT I WAS GOING TO
POINT OUT. WHEN YOU ARE LOOKING
AT THIS CHART, IT'S VERY EASY
TO STAY SORT OF FOCUSED ON THE
DIFFERENCE COLUMN, SO WHAT'S
RED, WHAT'S BLACK, TO TELL YOUR
SELF GOOD NEWS VERSUS BAD NEWS.
AND I WANT TO ENCOURAGE THE
COUNCIL MEMBERS TO LOOK AT THAT
MIDDLE COLUMN FOR 23 AND 24 AND
JUST KIND OF COMPARE ACROSS
YEARS. SO ONE EXAMPLE OF THE
PLATEAUING THAT YOU ARE SEEING
DIRECTOR NOBLE TALK ABOUT, TO
HEAR WHERE YOU SEE RETAIL SALES
TAX. YOU SEE A VERY SMALL, LESS
THAN $1 MILLION INCREMENT
BETWEEN THE TWO YEARS. AND THEN
ANOTHER CASES YOU SEE UTILITY
TAXES, WHICH ARE $42 MILLION IN
23 AND $39 MILLION IN 24. SO
ALTHOUGH THE DIFFERENCE BETWEEN
THE LAST FORECAST AND THIS
FORECAST APPEARS POSITIVE, WHEN
YOU LOOK AT THOSE DETAILED
NUMBERS BETWEEN THOSE TWO YEARS
YOU SEE THAT DIFFERENCE IN THAT
DECLINE. SO IT'S ACTUALLY
PLAYING OUT EXACTLY HOW
DIRECTOR NOBLE IS TALKING ABOUT
IT IN THAT PLATEAUING EFFECT. S
I WANTED TO CALL THAT PEACE OUT
AS WE ARE REVIEWING THESE CHART
SO YOU SEE THOSE DETAILS IN
THERE.
>> I SEE THAT DEPUTY MAYOR
HARRELL HAS THEIR HAND UP AS
WELL.
>> SINCE YOU MENTIONED THAT,
DIRECTOR DINGLEY, I WANTED TO G
BACK TO SOMETHING THAT WAS FROM
EARLIER. I KNOW WE ALWAYS GET
THIS INFORMATION. IT TAKES A
SECOND TO DIGEST IT. ONE OF THE
THINGS THAT SURPRISED ME FROM
OUR EARLIER NUMBERS WAS THE
SUSTAINED -- THE SUSTAINED HIG
LEVEL OF INFLATION. I DON'T KNO
IF WE TALK ABOUT IT, DIRECTOR
NOBLE, AND I JUST GLOSSED OVER
IT , OR IF WE DIDN'T REALLY GET
INTO THAT MUCH. BUT THE NUMBERS
LOOK POSITIVE, BUT I AM
CONCERNED ABOUT THE LEVELS OF
INFLATION THAT YOU PREDICTED IN
THE EARLIER SLIDES, OR THAT AR
SHOWN IN EARLIER SLIDES, HIGHER
THAN TYPICAL. LIKE I'M LOOKING
AT THE BEGINNING. YOU DON'T
HAVE TWO. BUT OF COURSE WE KNO
ABOUT THE 8% FROM 2022, BUT
WHAT LOOKS DARN NEAR 6% IN 2023
IS PRETTY ALARMING TO ME, AS
WELL AS THAT HIGH LEVEL OF 4%
IN 2024, AND IT STARTS TO RETUR
TO NORMAL IN 2025 POINT ARE TH
INFLATION NUMBERS REFLECT DID I
THE -- INFLECTED IN THE
INCREASES IN GENERAL FUND
REVENUE.
>> PERMISSION TO MOVE TO THE
NEXT SLIDE, BECAUSE I REALLY
WANT TO HIGHLIGHT THIS VERY
POINT, THE ISSUES AROUND REAL
SORT OF INFLATION ADJUSTED GROS
AND THE NOMINAL VALUES THAT YO
SEE HERE. LET ME USE THE NEXT
SLIDE. IT TAKES A MOMENT TO
DESCRIBE. IT'S A DIFFERENT PIEC
THAN WE'VE DONE IN THE PAST. I
REALLY WANTED TO MAKE THIS POIN
THAT WE ARE PUTTING ON A
FORECAST, THIS PREVIOUS FORECAS
, THERE POSITIVE INCREMENT TO
THE GENERAL FUND, WORRIED THAT
MIGHT BE MISINTERPRETED IN TERM
OF THE REAL ENVIRONMENT THAT WE
ARE ENTERING. I MADE THE POINT
EARLIER, THIS IS WHERE WE GET
BACK TO IT AND WE'RE GOING TO
GET BACK TO IT. I DON'T WANT T
BACK UP THE SLIDES ALL THE WAY.
THE TECHNOLOGY SECTOR OR HAS
GONE 60% IN THE CITY. IN HIS
DRIVEN OFFICE CONSTRUCTION, IT
HAS DRIVEN RESIDENTIAL
CONSTRUCTION. IT'S BEEN A KEY
DRIVER AND WE ARE IN AN
ENVIRONMENT WHERE THE GENERAL
FUND HAS BEEN GROWING IN WHAT
ECONOMISTS CALL REAL TERMS, SO
GROWING AHEAD OF INFLATION.
BASED ON THE FORECAST THAT WE
HAVE, BOTH ON THE NATIONAL LEVE
AND THE REGIONAL LEVEL, WE CAN
MAKE A SORT OF APPEAL TO COMMON
SENSE. THE TECHNOLOGY SECTOR IS
AS COOL AS IT SEEMS TO BE. I'M
NOT EXPECTING 20,000 LAYOFFS OR
PICK YOUR NUMBER, BUT RATHER
THAT IS ONE HAS BEEN AN ENGINE
OF GROWTH SEEMINGLY WILL NOT BE
AN ENGINE OF GROWTH AT LEAST
NEAR-TERM. PLAY THIS OUT FOR A
MINUTE. I WANTED TO GIVE YOU A
PICTURE, WHAT DOES THE GROWTH I
THE GENERAL FUND LOOK LIKE
OVERTIME? THAT'S A LITTLE BIT
TRICKY TO DO AND I'M GOING TO
WHIPSAW BACK AND FORTH HERE. BU
ONE THING YOU HAVE TO RECONCILE
IF YOU LOOK AT THE GENERAL FUND
GOING FORWARD IS THAT CURRENTLY
THERE IS -- LOOKING AT THE FUN
BALANCE TRANSFERS ACROSS
ACTUALLY ALL THREE YEARS, SO
IT'S $150 MILLION, AND THIS IS
-- A LOT OF THIS IS THE PAYROLL
AT SPENCE TAX, TO NAME WHAT IS
HELPING SUPPORT THE GENERAL FUN
AND REALLY SUPPORTING THE CITY'
BUDGET. IT'S USUALLY
BENEFICIAL. BUT THE VERY
SIGNIFICANT TRANSFERS. SO MORE
THAN 115, NOT ALL OF IT,
EXPENSES, $85 MILLION, IF I
RECALL, IN 2023. SIGNIFICANT
TRANSFER EXPECTED IN 2024.
ALSO, GRANTS ARE THIS WEIRD
THING THAT KIND OF GO UP AND
DOWN. SO I THINK THOSE TWO
THINGS YOU NEED TO SET ASIDE,
BECAUSE THEY ARE KIND OF
ONE-TIME OR IN TERMS OF FUND
TRANSFERS, OR THEY'RE THE GRAN
REVENUES THAT ARE BEING EXPENDE
FOR A SIGNIFICANT THING. IF YOU
TAKE THOSE ASIDE AND YOU LOOK A
EVERYTHING ELSE, THAT'S WHAT
THIS CHART DOES. SO I CALL
THOSE CORE REVENUES BECAUSE I
NEEDED TO GIVE THEM A TITLE. AN
SO WHAT WE'VE DONE HERE IS
TAKEN 2022 AS A BASE. SO AGAIN,
THAT'S HE'S CORE REVENUES. TOOK
OUT $150 MILLION OF TRANSFERS
THAT WAS THERE, AND ALSO,
WHATEVER GRANTS THAT YEAR. AND
ON THIS KIND OF GREEN, SLIGHTLY
TRANSPARENT THING, THIS IS THE
BENCHMARK. THIS IS THE
INFLATIONARY BENCHMARK. SO I
TOOK THE 2022, AND THIS IS A
REVENUE SIDE, NOT THE
EXPENDITURE SIDE, JUST TO BE
CLEAR. WE DO A SIX-YEAR
FORECAST AND WE DO IT FOR A
REASON, SO I REALLY WANT YOU TO
SEE THE FULL SIX YEARS. THE
GREEN IS THE BENCHMARK. SO IF
2022 REVENUES WERE TO GROW AT
INFLATION, THEY WOULD BE THAT
GREEN LINE. THE BLUE IS WHAT W
ARE ACTUALLY FORECASTING THEM T
GROW AS, AND THIS GETS VERY MUC
TO THE POINT THAT YOU WERE
CONCERNED ABOUT, DEPUTY MAYOR.
WHAT YOU SEE IS THAT THE GENERA
FUND IS GOING TO LOSE GROUND. I
THIS FORECAST IS RIGHT AND
THERE'S A KIND OF HEURISTIC, IF
YOU WILL. WE UNDERSTAND WHAT'S
BEEN DRIVING THE LOCAL ECONOMY
AND WHAT MIGHT NOT. IF IT'S
RIGHT, WE ARE GOING TO GROW WEL
UNDER INFLATION FOR AN EXTENDED
PERIOD OF TIME. THAT'S A REVENU
ENVIRONMENT THAT THE CITY HAS
NOT SEEN IN A VERY LONG TIME. I
MEANS FROM A BUDGETARY SIDE, YO
ARE CHALLENGED IMMEDIATELY TO
MAINTAIN EXISTING SERVICES. NOT
TO SAY MORE ABOUT THAT THAN
EXPENDITURES BUT IT'S THE
REVENUE FORECAST. THIS IS
SHOWING YOU THE VALUE, THE REAL
VALUE OF THIS REVENUE FORECAST,
AND IN REAL TERMS IT'S
DECLINING. THAT WOULD INHERENTL
BE A CHALLENGE FOR THE CITY. TH
FORECAST OFFICE, UNDERLINING M
OWN FORECAST IS PROBABLY
INAPPROPRIATE, BUT SIX YEARS OU
I DON'T KNOW, EITHER. BUT I DO
KNOW THAT WHAT HAS BEEN -- I
KEEP COMING BACK TO IT -- WHAT
IS BEEN SUCH A TREMENDOUS DRIVE
AROUND HERE DOES NOT FEEL LIKE
IT WILL BE. SO SOME VERSION OF
THIS IS LIKELY THE CASE. AND YO
THINK ABOUT THE EFFECTS THAT
COULD RIPPLE INTO OUR REVENUE
STREAMS. I DON'T THINK ANYONE I
GOING TO BUILD AN OFFICE TOWER
IN THE CITY FOR A LONG TIME.
INTEREST RATES -- PER THE
ARTICLE THIS PAST WEEKEND,
INTEREST RATES ARE ALREADY
TAKING A TOLL ON THE
RESIDENTIAL, MULTIFAMILY
RESIDENTIAL SIDE, AS WELL. SO
THERE ARE REAL CONCERNS HERE. I
THOUGHT IT WAS IMPORTANT -- WE
PUT SOME MONEY ON THE TABLE, IF
YOU WILL, IN 23 AND 24, BUT I
DON'T WANT YOU TO LOSE SIGHT .
WE COULDN'T PUT THIS PICTURE UP
IN NOVEMBER. IT'S A LITTLE BIT
-- IT WILL BE A LITTLE BIT WORS
NOW IS THE GROWTH WE ARE
PROJECTING IS FLATTER AND
INFLATION PERSISTS FOR SOMEWHAT
LONGER. BOTH THOSE THINGS DRIV
THE DIFFERENCE BETWEEN THE TWO.
THIS IS THE ENVIRONMENT THAT WE
APPARENTLY ARE IN. AND AGAIN,
THAT'S REALLY MORE ABOUT THE
UNEVENNESS GETTING THEM LOOKIN
FORWARD.
>> THAT'S HOW LONG, GO BACK TO
TOM MIKESELL, WHO HAS HIS HAND
UP.
>> THANK YOU, DIRECTOR NOBLE.
WHAT PORTION OF CORE REVENUES I
REPRESENTED BY PROPERTY TAXES?
BECAUSE THOSE ARE LIMITED BY TH
STATE TO REPRESENT THIS NEW
CONSTRUCTION.
>> THEY'VE GOTTEN TO THE POINT
OF BEING ROUGHLY $400 MILLION.
THE TOTAL HERE IS IN THE
NEIGHBORHOOD OF 1.5. SO IT'S A
VERY SIGNIFICANT SHARE . THIS I
THE POINT WE MADE IN NOVEMBER
LAST YEAR, WHICH WAS THAT ONE O
THE PEDESTALS OF -- THE GENERA
FUND RELIES ON FOUR REALLY
SIGNIFICANT REVENUE SOURCES.
PROPERTY TAX IS ONE OF THEM,
SALES, B ENDO AND UTILITY TAXES
ARE OTHERS. AND ONE OF THEM,
PROPERTY TAXES, CONSTRAINED TO
GROW AT ONE PERSON. WITH NEW
CONSTRUCTION, WE WERE GETTING A
ADDITIONAL 1 1/2. SO WE WERE
ACTUALLY SEEING PROPERTY TAX
REVENUES GROW AT SOMETHING LIKE
2 1/2%. SOME OF THE CONSTRUCTIO
OF THOSE OFFICE TOWERS, NOT TO
MAKE MY OWN POINT AGAIN, BUT IS
THERE A REASON TO THINK THAT
WON'T BE HAPPENING? THE OTHER
THING THAT IS GOING ON AS WE
WERE GETTING TO AND 1/2% GROWTH
AND INFLATION WAS LOW ENOUGH
THAT THAT WAS KEEPING UP, SO TH
2 1/2% GROWTH IN PROPERTY TAXES
WERE KEEPING UP WITH INFLATION
AND OTHER THINGS WERE GOING
AHEAD OF INFLATION. EXPECTATION
IS CERTAINLY ON THE NEW
CONSTRUCTION SIDE THAT'S NOT
LIKELY GOING TO BE AS ROBUST AS
GOING FORWARD. THAT'S PART OF
WHAT YOU ARE SEEING HERE.
>> THAT'S ACTUALLY THE NEW
CONSTRUCTION FORECAST FOR
2023-2024 ?
>> IS DOWN MARGINALLY. OVER THE
COURSE OF THE NEXT FEW YEARS
IT'S DOWN -- GO BACK AND LOOK A
SOMETHING EXACTLY LIKE 10% TO
15%. PART OF IT IS NOT MORE THA
2023 BECAUSE THE WAY THAT NEW
CONSTRUCTION WORKS IS THE
INCREMENT IS MEASURED
ESSENTIALLY FROM JUNE TO JUNE.
AND A LOT OF PROJECTS ARE
ALREADY UNDERWAY AND ENROLLING.
AND FURTHER PROPERTY TAX
REVENUES , NEW CONSTRUCTION
THROUGH JUNE OF THIS YEAR WILL
AFFECT PROPERTY TAXES IN 2024.
SO THEY ARE PROBABLY STILL
PRETTY GOOD. IT'S THE INCREMENT
TO PROPERTY TAXES IN 2025 AND
BEYOND WHERE WE'LL START TO
POTENTIALLY SEE THIS NEW
CONSTRUCTION EFFECT SITTING IN.
AND THAT NEW CONSTRUCTION
FORECAST IS A LITTLE BIT TRICKY
TO DO. BECAUSE A LOT OF IT IS
INFORMED BY PERMITS AND PEOPLE
CAN PULL PERMITS AND THEN NOT D
PROJECTS. SO WE'RE GOING TO HAV
TO SEE WHAT KIND OF ENVIRONMENT
WE GET INTO. AGAIN, IT'S WORTH
READING THIS ARTICLE IN THE
TIMES YESTERDAY. IT DOESN'T MAK
THAT POINT BUT FOLKS ARE TALKIN
ABOUT THE FACT THAT THEY HAVE
THESE PROJECTS ON THE SHELF,
DEVELOPERS, THAT SUDDENLY DON'T
PENCIL IN THE WAY THAT THEY
THOUGHT THEY WERE GOING TO. THA
MAY WELL MEAN THAT THEY WON'T
PROCEED.
>> I WOULD JUST CAUSE REAL
QUICK. TOM, DID YOU HAVE SOME
OTHER QUESTIONS OR IS THERE AN
ISSUE THAT YOU WANTED TO DRAW
HERE FOR US WITH THOSE LINES OF
QUESTIONS?
>> NO, THANKS FOR ASKING, CHAIR
MOSQUEDA. JUST PART OF IT IS AN
EXISTING STATUTORY FRUSTRATION
THAT IS ALWAYS PRESENT WITH
REGARDS TO OUR REVENUE
STRUCTURE. NOT THAT IT MAKES IT
ANY EASIER, BUT IT'S NOT IN
TERMS OF INKING THE ENVIRONMENT
JUST MORE OF A STATUTORY
EXTREME.
>> ABSOLUTELY.
>> REAL QUICK MOVING ON,
LARGELY WHAT HAD TO SAY ABOUT
THE GENERAL FUND, DID WANT TO
HIGHLIGHT WHAT IT WOULD LOOK
LIKE IN THE SCENARIO SO YOU HAV
A SENSE BECAUSE YOU HAVE A
JUDGMENT SURELY YOU HAVE TO
MAKE. THE CHARTIER FLORAL IN TH
DARK, THE BASELINE FORECAST AN
IN THE LATER BLUE THE DOMESTIC
FORECAST. AND THEY SHOW ON THE
LEFT IS DIFFERENCE IN RETAIL
SALES. ON THE RIGHT, THE
DIFFERENCE IN B ENDO. THE
HEADLINE HERE IS PROBABLY IN TH
THIRD BULLET, THOUGH, WHICH IS
THAT THOSE ARE THE TWO REVENUE
SOURCES. IF YOU HAD ACROSS ALL
THE GENERAL FUNDS SOURCES A
COUPLE SLIDES AGO, THE
PESSIMISTIC FORECAST WOULD BE
$27 MILLION LOWER IN 23, ALMOST
$50 MILLION LOWER IN 24. SO FO
A TOTAL OF $78 MILLION LESS
REVENUE, AGAIN, LARGELY IN SALE
AND B ENDO, BUT CERTAINLY NOT
EXCLUSIVELY IN TERMS OF THE
IMPACT ON THE FORECAST. SO JUS
TO GIVE YOU THAT CONTEXT , WITH
THAT I'M GOING TO MOVE ON TO TH
NON-GENERAL FUND, WHICH IS GOIN
TO INCLUDE PAYROLL AND ALSO BE
QUITE SIGNIFICANT.
>> JUST BEFORE YOU MOVE ON, I
WANTED TO DOUBLE CHECK TO SEE I
THERE IS ANY ADDITIONAL
COMMENTS. DEPUTY DIRECTOR
PENNUCCI, I SEE YOUR CAMERA ON.
ANYTHING ELSE YOU'D LIKE TO ADD
>>? NO THANK YOU, CHAIR
MOSQUEDA. THE POINT THAT I WAS
TRYING TO GET TO AROUND PROPERT
TAXES.
>> OKAY. ALL RIGHT.
>> SO THESE ARE THE NON-GENERAL
FUND. SAME SETUP AS BEFORE. 22
ACTUAL FIGURES FROM THE
NOVEMBER, THE NEW FORECAST AND
THE DIFFERENCE, AND AGAIN THE
SAME FOR 2024. OBVIOUS AND KIND
OF HEADLINE HERE IS ON THE
PAYROLL TAX. SO 2022 ACTUAL -
IS THAT THE RIGHT NUMBER? I
THINK THAT LINE IS WRONG.
THAT'S SLIGHTLY -- IT'S NOT
CRITICAL. THE ADOPTED FORECAST
WAS AS HIGH AS $294 MILLION.
THAT WAS DURING THE NOVEMBER
FORECAST. YOU'LL RECALL THAT WE
DIDN'T UPDATE THE FORECAST.
THAT ACTUALLY IS A NUMBER WE
GENERATED IN AUGUST. WE HADN'T
UPDATED IN NOVEMBER , WE DIDN'T
HAVE ENOUGH INFORMATION TO KNOW
WHAT WAY THINGS ARE GOING.
ULTIMATELY REVENUES CAME IN
UNDERPERFORMING IN A WAY THAT W
VISITED LAST PRESENTATION. SO
WE ARE ADJUSTING THE FORECAST T
REFLECT WHAT WE SAW REALLY
EMERGE LAST YEAR, AND WE'LL
COME BACK AND DISCUSS THIS IN
DETAIL. THAT'S A $31 MILLION
REDUCTION IN 2023 AND SIMILARL
IN 2024. LET ME COME BACK AND D
A WHOLE SLIDE TO DISCUSS.
MINIMAL CHANGES IN THE
ADMISSIONS TAX, SHORT-TERM
RENTAL TAX. I WILL CALL OUT THE
FOOTNOTE ON ADMISSIONS TAX. IT'
A NET INCREASE OVERALL OF ABOUT
$600,000 IN 2023, ABOUT THE SAM
IN 2024. IT'S IMPORTANT TO
UNDERSTAND THAT THE REVENUES
GENERATED AT CLIMATE PLEDGE
ARENA ARE PART OF THE FINANCIAL
AGREEMENT WE HAVE AROUND
REDEVELOPMENT, AND THEY LARGELY
STAY WITH THE PROJECT, IF YOU
WILL. IT'S IMPORTANT FROM A CIT
PERSPECTIVE TO KNOW THE SPLIT
BETWEEN WHAT'S A CLIMATE PLEDGE
AND WHAT'S EVERYWHERE ELSE.
THERE'S MORE GOOD NEWS HERE, SO
THE INCREMENT THAT'S SORT OF
AVAILABLE, SPECIFICALLY TO ARTS
AND CULTURE, BECAUSE THAT'S
WHERE THESE MONIES ARE
DEDICATED, IS CLOSER TO
$900,000, JUST ABOVE $900,000
FOR 2023, AND IS $1.5 MILLION
FOR 2024. WE'LL PROVIDE ALL
THOSE DETAILS TO STAFF. NOT ALL
CHANGES IN FOOD AND BEVERAGE AN
SHORT-TERM RENTAL TAX IN BOTH
YEARS. THE FORECAST DOWN
SIGNIFICANTLY. EVEN AT $91
MILLION SICKNICK EFFICIENTLY
UNDERPERFORMED OVERALL AND THE
UNDERPERFORMANCE TO OUR NOVEMBE
FORECAST WAS ONLY A FEW MILLION
BUT WE'LL COME BACK TO THIS
BECAUSE WE HAVE SOME SLIDES
HERE, TOO. WE HAD THE RESULTS
OF THE FIRST PART OF THIS YEAR
ARE POSITIVELY CONCERNING, SO
THEY HAD US BRING DOWN THE 2023
FORECAST SIGNIFICANTLY RELATIVE
TO NOVEMBER, AND SIMILARLY FOR
2024. TRANSPORTATION SPECIFIC
REVENUES, MINIMAL CHANGES
OVERALL. COMMERCIAL PROPERTY TA
UP . THE SALES TAX UP WITH
OVERALL FORECAST FOR SALES
TAX. PARKING INFRACTION
PENALTIES DOWN SOMEWHAT
SIGNIFICANTLY. I DON'T KNOW
WHETHER DAVE OR ALEX WANT TO
COMMENT ON THAT ONE.
>> SURE, COMMERCIAL PARKING TAX
>> THAT AND THE PARKING
INFRACTION'S.
>> I'M SORRY, YEAH, SURE. THAT'
BASICALLY DOWN TO -- THE CITY
INSTALLED SIX NEW CAMERAS IN TH
FALL OF 2022, AND ESSENTIALLY
HAVE TO MAKE AN ESTIMATION OF
WHAT THE CITATION VOLUME WILL B
FROM THAT ROADWAY. A NUMBER OF
CARS AND SO FORTH, IT'S BEEN
JUST UNDER FORECAST. SO THIS IS
ADJUSTED FOR ACTUALS FOR THE
OTHER PART OF IT IS COLLECTIONS
THE ACTUAL ONSET OF COLLECTIONS
WAS LATER THAN ANTICIPATED
ORIGINALLY.
>> ICY DEPUTY MAYOR HARRELL HA
A QUESTION.
>> IS THIS JUST FOR INLAY
TERMS? PARKING INFRACTION
PENALTIES.
>> CAMERA REVENUES ARE LABELED
AS PARKING , BECAUSE IN STATE
LAW THAT'S THE INFRACTION THAT
THEY ARE UNDER. BUT THESE ARE
THE SPEED ZONE CAMERAS IN SCHOO
ZONES.
>> THESE ARE IN SHORT, THEY ARE
RED LIGHT CAMERAS.
>> NO, SPEED CAMERAS.
>> THE SPEED CAMERAS IN THE
SCHOOL ZONE, SORT OF THING.
>> I'LL CHANGE THAT LABEL. IS
NOT HELPFUL. I APOLOGIZE.
>> IT'S JUST I WAS TRYING TO
CONNECT THOSE. AND SO ON THOSE
WE ARE PREDICTING THAT THEY AR
JUST NOT AS -- THEY ARE JUST
NOT AS -- I HATE TO SAY
PROFITABLE BECAUSE THEY'RE NOT
SUPPOSED TO BE PROFITABLE.
>> PRODUCTIVE IN TERMS OF
CITATIONS.
>> AND THEY ARE MEANT TO CHANG
BEHAVIORS. SO ARE WE SEEING THA
YES THERE'S A DIP IN REVENUE,
BUT MAYBE WE CHANGED BEHAVIORS
IN THOSE AREAS?
>> IT COULD BE. I WOULD LEAVE
THAT UP TO THE POLICE DEPARTMEN
TO TRACKS THAT. TO TALK ABOUT
WHAT THE EFFECTS HAVE BEEN IN
THOSE AREAS. NUMBER OF TOTAL
VOLUME OF SPEEDING PEOPLE, AND
SO FORTH. I JUST HAVE THE VIEW
ON REVENUE.
>> BUT I WOULD ADD, SENIOR
DEPUTY MAYOR, THAT OVER THE
YEARS OUR ORIGINAL ANTICIPATED
BEHAVIORAL EFFECT, WE ORIGINALL
ANTICIPATED REVENUES WOULD
INCREASE AND THEN DECREASE. THE
DECREASE HADN'T HAPPENED AND
MAYBE IT ISN'T THE WAY YOU
OBSERVED, IT IS HAPPENING. I
CERTAINLY KNOW IN MY HOUSEHOLD
WE ARE APPROPRIATELY MORE
CAREFUL THAN WE HAVE IN THE
PAST, AND THAT'S THE KIND OF
BEHAVIOR CHANGE YOU WOULD WANT.
>> IT'S DEFINITELY THE CASE WHE
YOU LOOK AT OLDER AREAS, THE
OLDER CAMERAS WHERE WE HAVE SEE
A DECLINE IN THE VOLUMES. AND
THAT'S ONE OF THE TRICKS OF
FORECASTING IT. HOW QUICKLY THA
BEHAVIOR CHANGE, AND IS IT
LEVELING OUT MORE THAN
CONTINUING A STEEP DECLINE?
>> THANK YOU SO MUCH, EVERYBODY
I APPRECIATE THAT WE ARE ALL
WEARING VARIOUS HATS IN THIS
REVENUE FORECAST COUNCIL
MEETING. I THINK SINCE IT'S BEE
PROMPTED OUT THERE, IT IS A
GOOD DISCUSSION FOR THE
EXECUTIVE AND LEGISLATIVE BRANC
TO FOLLOW-UP ON WITH THE POLICE
DEPARTMENT, BECAUSE MY CONCERN
IS THAT THIS IS A DECREASE DUE
TO STAFFING ALLOCATIONS FOR
REVIEWING THE TRAFFIC CAMERAS.
AT LEAST THAT'S SOMETHING THAT
CAME UP IN THE LAST SIX MONTHS,
WHERE PERSONNEL WAS MOVED FROM
REVIEWING THE TRAFFIC CAMERA
FOOTAGE TO DOING OTHER WORK, AN
WE ALL KNOW HOW IMPORTANT IT IS
TO MAKE SURE THAT THERE'S STAF
IN THE COMMUNITY, BUT
ADDITIONALLY WE WANT TO CHANGE
BEHAVIOR SO PEOPLE DON'T SPEED
IN THESE AREAS, AND TO THE
DEGREE THAT THERE'S REVENUE TO
BE RECOUPED HERE, WE WANT TO
MAKE SURE THAT IS STILL BEING
PRIORITIZED. SO UNLESS SOMEBODY
ELSE HAS AN UPDATE ON THAT, I
THINK IT IS A WORTHY
CONVERSATION TO MAKE SURE THAT
THIS IS NOT SOLELY BECAUSE OF
BEHAVIOR CHANGE, AND ALSO, IF
THERE IS REALLOCATION OF STAFF,
THAT WE NEED TO CONSIDER OUTSID
OF THE FORECAST COUNCIL TO
ENSURE THAT MORE REVENUE IS
COMING IN HERE. I THINK IT'S A
WORTHY DISCUSSION, UNLESS
ANYBODY ELSE HAS ANY OTHER MORE
RECENT UP DATES ON THAT
STAFFING. OKAY. MORE TO BE DON
ON THAT.
>> BUT BEFORE WE LEAVE THIS
SLIDE, I WANT TO EXPLAIN THE 2
ACTUAL NUMBER. BECAUSE IN SOME
WAYS, IT'S INFORMATIVE. IN MANY
WAYS. IT PROBABLY DESERVED ITS
OWN FOOTNOTE. SO THE 2022
ACTUALS ARE REPORTED HERE IS
$200 MILLION. WHAT I HAD
FORGOTTEN ABOUT THAT IS THAT WA
$253 MILLION OF CURRENT
REVENUES. SO THOSE ARE PAYMENTS
FOR '22 OBLIGATIONS. YOU RECAL
THAT WE FOR A LONG TIME HAD LAT
PAYMENTS FROM 2021, SO $50
MILLION OF THIS, GIVE OR TAKE O
THIS TOTAL WAS FROM 2021. SO IT
WAS ON ACTUALS OF 253 FOR 2022
THAT WE ARE NOW MAKING A
FORECAST OF 263. YOU'LL SEE THI
IN OUR NEXT SLIDE. BEFORE I LEF
THIS, I WANTED TO EXPLAIN THAT
WAS A COMBINATION OF THE LATE
2021 PAYMENT AND THE CURRENT
2022 PAYMENTS. SO LET ME TALK
ABOUT -- WE ARE TAKING $30
MILLION OFF THE TABLE FOR EACH
OF 2023 AND 2024. I DO WANT TO
EXPLAIN WHY. I WANT TO GIVE YOU
A BETTER SENSE OF THE NATURE OF
THAT FORECAST BECAUSE WE ARE
DOING THE BEST WE CAN. MY
COLLEAGUE DON HAS DONE
TREMENDOUS WORK IN TRYING TO
MODEL THIS AND DEVELOP THE BEST
FORECAST WE CAN, BUT WE HAVE
LIMITED INFORMATION SO I WANT T
BE COMPLETELY TRANSPARENT ABOUT
HOW WE ARE DOING THE FORECAST.
ACTUALLY PART OF IT IS
CREATIVITY BUT IT IS GOING TO B
TRICKY TO MAKE THIS ONE RIGHT.
JUST REMIND YOU THAT ACTUAL
REVENUES IN 2021, THEY'RE NOT
ACTUALLY HIGHER THAN -- THEY'RE
293. THEY FELL TO 253, SO A
SIGNIFICANT DROP, $40 MILLION
DROP . WE WERE STILL HOLDING TO
A 294 FORECAST IN NOVEMBER. WE
RECALL , WE DON'T HAVE A BETTER
NUMBER TO GIVE YOU. WE DIDN'T
FEEL GOOD ABOUT THIS ONE BUT WE
DON'T HAVE A BETTER NUMBER TO
GIVE YOU. WE WERE RIGHT TO BE
NERVOUS. NOT PROUD OF IT THAT W
DIDN'T HAVE A FIRM FORECAST.
JUST AGAIN TO REMIND YOU, AND
YOU'LL SEE THIS IN THE
FORECASTING EFFORT, THE
RELATIVELY FEW FIRMS THAT ARE
GENERATING A LOT OF THIS
REVENUE. THEY'RE HEAVILY
REPRESENTED BY THE TECHNOLOGY
FIRMS AND THOSE FIRMS IN
PARTICULAR, THIS MATTERS FOR
FORECASTING. THEY'VE BEEN
HEAVILY EFFECT DID BY HIGHWAY
WORK. THERE ARE A LOT OF JOBS
YOU CAN DO IN FRONT OF A
COMPUTER AND YOU CAN DO FROM A
REMOTE LOCATION. THERE ARE ALSO
A SECTOR WHERE STOCK
COMPENSATION IS A BIG PIECE OF
IT, STOCK VALUE OF THE COMPANY
MATTERS HOW MUCH PEOPLE GET PAI
AND THUS TO THE TAX REVENUE.
AND WE'VE ACTUALLY DONE WORK ON
THIS, DONE WORK ON THE DATA
LEVEL TO CORRELATE THAT. SO IF
YOU LOOK AT FIRMS THAT STOCK
VALUES DECLINED BETWEEN 2021
AND 2022 IN GENERAL, THE
REVENUES THEY PAID TO US
DECLINED . SIMILARLY, WORK FROM
HOME, AND I WILL SHOW YOU WHAT
THIS REALLY LOOKS LIKE IN JUST
MOMENT HERE. FIRMS THAT APPEAR
TO HAVE MORE FOLKS GOING TO THE
OFFICE IN 2022 COMPARED TO 2021
THEY APPEAR TO BE -- THEY DID I
GENERAL PAY US MORE. THAT'S KIN
OF WHAT WE EXPECTED, AND WE GOT
THAT. BUT IMAGINE THAT THIS IS
HANDFUL, THERE'S 25 TO 30 FIRMS
THAT ARE GENERATING MOST OF THI
REVENUE. THIS IS A HANDFUL OF
DATA POINTS BETWEEN THOSE TWO
YEARS. IS NOT A ROBUST SET OF
INFORMATION, BUT AGAIN, THIS IS
WHO IS DRIVING THE REVENUE. I
WOULD ADD, AND THIS IS LAST
BULLET, WE ARE CONTINUING TO
WORK VERY HARD. I'M GOING TO
LEAVE THIS MEETING AND DIALOGUE
WITH SOME FOLKS AT ESD TO TRY T
SECURE MORE DETAIL DATA. IT'S
DATA WE WOULD NEED TO KEEP VERY
VERY SECURE, SO THAT WE
RECRUITED I.T., IT'S A VERY
COLLOCATED PROBLEM. EFV HAS BEE
QUITE HELPFUL BUT IT'S GOING TO
BE A DIFFICULT NOT TO CRACK TO
MAKE SURE EVERYONE IS
COMFORTABLE HAVING ACCESS TO
WHAT AMOUNTS TO INDIVIDUAL LEVE
EMPLOYMENT DATA. I JUST WANT YO
TO KNOW WE ARE CONTINUING TO
WORK ON THAT FRONT. WHAT WE DID
ON A MODELING SIDE, I'M GOING T
FLIP THE SLIDE IN JUST A MINUTE
AS WE WERE ABLE TO LINK THIS
CHANGING REVENUES BETWEEN 2021
TO 2022 STOCK VALUES AND FOLKS
IN AN OFFICE. WE GET A FORECAS
GOING FORWARD THAT WE ACTUALLY
NEED A PREDICTION OF WHAT STOCK
VALUES AND IN OFFICE BEHAVIOR
WILL BE FOR THIS YEAR FOR 2023
I MENTIONED PREVIOUSLY THAT
FORECASTING WAS GOING TO INVOLV
ESSENTIALLY FORECASTING THE
FINANCIAL PROSPECTS FOR
INDIVIDUAL COMPANIES. AND THAT'
LITERALLY WHAT IT'S COME DOWN
TO. BECAUSE AGAIN, THE STOCK
PRICE DRIVES THINGS. SO WHAT
WE'VE BEEN ABLE TO DO IS TO GO
OUT IN THE PUBLIC SPACE AND
THERE ARE FOLKS WHO ARE
FORECASTING WHAT FIRMS STOCK
PRICES ARE GOING TO BE BY YEAR
END AND QUARTER BY QUARTER. AND
THOSE ARE REPRESENTED JUST FOR
A HANDFUL OF SOME OF THE
COMPANIES THAT THEY REPRESENTE
THERE ON THE LEFT. YOU CAN SEE
IT'S A MIX. AND THE GRAPH SHOW
YOU THE MIDPOINT IS THE RED AN
THEN THE SPREAD IS KIND OF THE
RANGE OF FORECAST. AND I SEE
ALLIE HAS A HAND UP, OR DID.
>> YOU CAN FINISH EXPLAINING
THIS AND ABOUT THE LOCATION .
WAS JUST GETTING IN THE QUEUE
WHEN YOU COMPLETED YOUR --
>> WE WILL GET THERE IN JUST A
MINUTE. YOU CAN SEE SOME ARE
PROJECTED TO INCREASE. SOME ARE
PROJECTED TO FALL. AS AN
ECONOMIST, I'M VERY COMFORTABL
DOING THIS BECAUSE THEY'RE ALL
KINDS OF THEORIES WHY THEY
SHOULDN'T BE AS PREDICTABLE AS
THIS. BUT IT IS INFORMATION THA
WE HAVE AND WE KNOW IT'S A
POTENTIAL DRIVER, SO WE ARE
DOING WHAT WE CAN. AND AGAIN, W
HAVE THIS INFORMATION FOR THOSE
WHO ARE MOST RESPONSIBLE FOR TH
REVENUES. ON THE RIGHT HERE IS
-- THIS IS ACTUALLY JUST MEANT
TO BE REPRESENTATIVE, AND I WIL
EXPLAIN IN MORE DETAIL WHAT
WE'VE ACTUALLY DONE. THIS IS
DATA THAT WE HAVE ACCESS TO
FROM PLACER. IT'S ANONYMIZED
FOOT TRAFFIC DATA THAT'S
GENERATED BY TRACKING CELL
PHONES. THE SAME THAT TELLS YO
HOW LONG IT'S GOING TO DRIVE
FROM ONE LOCATION TO ANOTHER.
THEY ARE TRACKING CELL PHONES I
CARS AND COMPUTING SPEED, SO YO
CAN DO THIS IN GENERAL AND YOU
CAN DO IT OVER GEOGRAPHY YOU
ESSENTIALLY USE GIS IN
COMBINATION WITH THIS DATA. SO
THIS SHOWS YOU BEHAVIOR OF
SHARED PEOPLE GOING INTO THIS
OFFICE AND THE BASELINE HERE I
REALLY THE DRIVER. WE HAVE THRE
DIFFERENT GEOGRAPHY SHOWN HERE
SOUTH LAKE UNION IN RED,
BELLTOWN IN BLUE, CENTRAL
BUSINESS DISTRICT IN YELLOW.
THESE ARE ILLUSTRATIVE OF THE
DATA WE HAVE ACCESS TO, BECAUSE
YOU CONSIDER SOME OF THESE
FIRMS. THEY OPERATE FROM
RELATIVELY CENTRALIZED LOCATION
SO YOU CAN DEVELOP PICTURES LIK
THIS FOR INDIVIDUAL CORPORATE
CAMPUSES, AND THAT'S THE NATUR
OF WHAT WE HAVE BEEN ABLE AND
HAVE NEEDED TO DO IN ORDER TO
TAKE THIS INFORMATION, THIS
CORRELATION, AND TURN THEM INTO
A FORECAST. SO WE KNOW WHAT
BEHAVIOR ON SOME OF THESE
CORPORATE CAMPUSES MEASURED THI
WAY HAS BEEN IN RECENT MONTHS.
THAT'S LARGELY THE BASIS FOR
GUESSING WHAT WILL HAPPEN OVER
THE REST OF THE YEAR. OUR BASI
ASSUMPTION IS THAT RECENT
BEHAVIOR NEEDS TO FORECAST THE
FUTURE, SO IF A LOT MORE FOLKS
RETURN TO THE OFFICE, THAT WILL
PROVIDE THE UPSIDE TO THE
REVENUE FORECAST . WE CAN
MONITOR THIS NOT QUITE IN REAL
TIME. WE'LL TRACK THIS QUARTERL
AND SEE HOW OFFICE BEHAVIOR IS
CHANGING . BUT THESE TWO DATA
SOURCES ARE INFORMING THE 2023
FORECAST MOST DIRECTLY. SO A
QUESTION BEFORE I --
>> THANK YOU, DR. NOBLE, AND
THANK YOU TO YOU AND YOUR TEAM.
I APPRECIATE THE CONTINUED SORT
OF CREATIVE THINKING AND WAYS T
REFINE HOW YOU ARE FORECASTING
THIS RELATIVELY NEW SOURCE OF
REVENUE, AND LOOK FORWARD TO YO
CONTINUING TO ENHANCE THAT,
ESPECIALLY IF YOU GET THAT
AGREEMENT WITH UST, WHICH I
THINK IS CRITICAL TO CONTINUING
TO REFINE YOUR MODEL. IN
THINKING ABOUT THE LOCATION OF
WORK OR THE WORK FROM HOME PIEC
IS IMPACTING THIS MODEL, I'LL B
CURIOUS TO SEE IN THE NEXT
FORECAST IN PARTICULAR, SO DOES
THE LOCATION-BASED DATA YOU ARE
TRACKING, PARTICULARLY GIVEN
THAT ONE OF OUR MAJOR EMPLOYERS
HAS ANNOUNCED, I THINK A
REQUIREMENT FOR RETURN TO THE
OFFICE LATER THIS SPRING. THIS
IMPACTS THE DATA YOU ARE LOOKIN
AT AND THOSE ANNOUNCEMENTS IN
THE FUTURE MIGHT BE CONSIDERED
FOR THINKING ABOUT THIS
PARTICULAR REVENUE.
>> THAT'S THE RIGHT THING TO BE
THINKING ABOUT. NOT QUITE AS
PREDICTIONS WILL MOVE AS WELL,
QUARTER TO QUARTER. IN OFFICE
BEHAVIOR IS OBVIOUSLY A KEY
ISSUE AND REALLY FOR THE
FORECAST OVERALL TO THE EXTENT
THAT IT MIGHT GENERATE -- MORE
FOLKS IN OFFICE MIGHT GENERATE
MORE RETAIL ACTIVITY AND MORE
PIANO ATTRIBUTABLE TO THE CITY
I WANT TO ILLUSTRATE WHAT WE
WERE DOING FOR 2023. FOR 2024
AND BEYOND, IT'S A LONG-RANGE
FORECAST . THERE'S NO WAY TO
PREDICT WHAT IN OFFICE BEHAVIOR
WILL BE IN 2024 AND BEYOND,
NEVERMIND STOCK PRICES. FOR THA
CHAIR OF THE FORECAST WE REVERT
TO THE REGIONAL MODEL AND THE
TRENDS IN PAYROLL WITH THE
INFORMATION AND BUSINESS AND
PROFESSIONAL SERVICES SECTORS.
SO AGAIN, DOING THE BEST WE CAN
IF YOU WILL. JUST TO HIGHLIGHT
THE RESULT HAS BEEN A
SIGNIFICANT REDUCTION,
ESSENTIALLY $31 MILLIONA YEAR
FOR BOTH 2023 AND 2024, BUT I
ALSO WANT TO HIGHLIGHT THAT THI
IS THE SAME FORECAST FOR
PAYROLL TAX GOING FORWARD. IT'S
NOT JUST 23AND 2024. THE
EXPECTATION NOW IS FOR A LOWER
BASE THAT WILL BE REFLECTED
GOING FORWARD. SO IT'S 20 TO
ACTUAL, I PROBABLY SHOULD'VE
DONE THIS AS 253 IN RETROSPECT.
I COULD GIVE YOU A SENSE THAT
WE ARE GROWING FROM THAT 253
BASE AND WE -- THE CLASS WAS
MUCH MORE ROBUST , BEING IN LIN
TO WHAT WE SAW FOR 2022
OBLIGATIONS IS THE PHRASE WE
USE, SO THAT 253 AND THEN HOW
IT INCREASES OR IS EXPECTED TO
INCREASE OVER THIS TIME. SO
AGAIN, IT IS BOTH LOWER, AND TH
GROWTH IS RELATIVELY MODEST.
THIS IS THE SECTOR THAT WE
EXPECT TO BE GROWING MODESTLY
NOW. SOME, IF YOU TRY THE LINE
CONNECTING THE BLUE, START TO
SEE MORE GROWTH IN 2027. DON'T
HAVE A NOVEMBER FORECAST FOR 28
SO I LEFT OFF 2028 IN THIS
PICTURE. WANTED TO GIVE YOU A
SENSE THAT THIS IS A LONGER-TER
EFFECT, IF YOU WILL COME IN
TERMS OF THE REVISION IN THE
REVENUE FORECAST.
>> DIRECTOR NOBILE, I SAW A HAN
FROM TOM. I DON'T KNOW IF YOU
HAVE A QUESTION ON THIS SLIDE
WERE THE PREVIOUS SLIDE.
>> I JUST WANTED TO CONFIRM, I
THINK WHAT I'M UNDERSTANDING
WHERE THE WORK FROM HOME IS THA
YOU ARE ASSUMING THE CURRENT
LEVELS, SO WHATEVER THAT GRAPH
BEFORE.
>> IT'S NOT EXACTLY THAT. THER
IS SOME ART AND SOME SCIENCE. W
CAN SEE THIS ON A MONTHLY BASIS
IN PLACES WHERE WE SEE A TREND
THAT'S BEEN UP, WE FORECAST
SOMETHING OF A TREND UP. THIS I
PAYOR BY PAYER, IF YOU WILL.
FOUR OTHERS WERE IT'S FLAT, YOU
CAN KIND OF ASSUME THAT THAT'S
BEEN FLAT . ANNOUNCEMENTS, IF W
SEE A TREND AND THERE'S BEEN
ANNOUNCEMENT THAT THIS IS REALL
A TREND IN POLICY, THEN FEEL
BETTER ABOUT PROJECTING IT, THA
WILL ALSO INCREASE. AGAIN, OUR
VENTURE IS TO BE SOMEWHAT
CONSERVATIVE IN THIS, THERE MAY
STILL BE UPSIDE AS PEOPLE COME
BACK TO THE OFFICE. BUT WE
HAVEN'T CONSUMED COMPLETELY FLA
BECAUSE WE ARE SEEING SOME
MARGIN OF INCREASE. I CAN GO
BACK. YOU CAN SEE SOME TREND,
HARD TO READ EXACTLY BUT THERE
DOES SEEM TO BE SOME ONGOING
INCREASE.
>> AND ANOTHER?
>> ON THAT TREND, ON THE 100%
THAT YOU HAVE, THAT IS WHEN
PEOPLE, WHEN THERE WAS A
CULTURE OF WORKING FROM THE
OFFICE, PRETTY MUCH YOU CAME
INTO WORK MONDAY THROUGH FRIDAY
THE 50% WHERE YOU KIND OF HAVE
IT RIGHT NOW , WE HAVEN'T HEARD
OF ANY COMPANIES CALLING THEIR
PEOPLE BACK IN PERSON 100%. SO
ARE YOU PAYING ATTENTION TO THA
AND ADDING THAT TO YOUR FUTURE
PROJECTIONS?
>> EXPECTATION IS CERTAINLY NOT
THAT WE'LL GET THERE. THE
CORRELATIONS WE HAVE BETWEEN 21
AND 22. THE DATA WE HAVE ARE
REALLY JUST MEASURING THOSE TWO
POINTS, NOT MEASURING ALL THE
WAY BACK TO 2020, BECAUSE THE
TAX WAS FIRST COLLECTED IN 2021
WE ONLY EVER COLLECTED THE TAX
IN A NOT OFFICE ENVIRONMENT, IF
YOU WILL, SO ANYTHING IS AN
IMPROVEMENT. BUT YEAH, WE'LL SE
WHERE THE LONGER RUN TRENDS
ULTIMATELY END UP. OUR
EXPECTATION IS CERTAINLY NOT TO
GET TO 100, THREE DAYS IN A
WEEK, ROUGH TERMS IS 60%. SO
3/5. WE'LL ALL BE WATCHING THI
GOING FORWARD.
>> LET US DOUBLE CHECK HERE, SE
IF ANYBODY ELSE IS IN THE QUEUE
. I HAVE A FEW QUESTIONS ON THI
SLIDE FROM ME. YOU MENTIONED,
HOW MUCH WAS IT THAT WE PUT FRO
THE JUMPSTART TO THE GENERAL
FUND OVER THE BIENNIUM ?
>> ABOUT $180 MILLION OVER THE
BIENNIUM, $85 MILLION, 185, I
THINK.
>> WE PUT ONE $85 MILLION FROM
JUMPSTART'S HIGHER PROTECTIONS
TO OFFSET THE REDUCTION OF
GENERAL FUND REVENUES . WE ALSO
PUT FUNDING INTO A RESERVE .
LET'S JUST CALL IT A RAINY DAY
FOR JUMPSTART. OBVIOUSLY WE
WOULD'VE PUT MUCH MORE INTO A
RESERVE BUT WE ARE TRYING TO
RESERVE ANY CLIPS IN PUBLIC
FUNDING AND BEING REALLY
CONSCIOUS ABOUT NOT HAVING NEW
EXPENDITURES WHEN WE HAD
PROGRAMS THAT WERE INVESTED AN
SUSTAINED FROM THE AMERICAN
RESCUE PLAN ACT, THE DEPARTMENT
OF LOCAL RELIEF FUNDS AND THE
ONGOING NEED FOR THOSE SERVICES
THAT WANTED TO RECOGNIZE THOSE
FEDERAL FUNDS WERE GOING TO GO
AWAY IN THIS BIENNIUM AND WE
WANTED TO MAKE SURE THAT NO
PEOPLE FELL OFF A CLIFF IN TERM
OF SERVICES, AND THAT WE DIDN'T
ENGAGE IN LAYOFFS DURING THE
TIME WHEN A LOT MORE PEOPLE NEE
PUBLIC SERVICE. BUT I JUST
WANTED TO REFERENCE THE FACT
THAT WE DO HAVE SOME RAZORS
PACKED AWAY FOR JUMPSTART AS
WELL AS THE GENERAL FUND . DID
ANY OF YOUR SLIDES CURRENTLY
INCORPORATE SOME OF THAT
INFORMATION?
>> THE ONLY INFORMATION
INCORPORATED IS THE ACTUAL
BUDGET ED TRANSFERS. WE ARE
LOOKING AT REVENUES, NOT AT
RESERVES . OBVIOUSLY IMPORTANT
POINT TO CLARIFY.
>> THIS IS CHALLENGING WORK I'
SURE ACROSS THE NATION AS PEOPL
TRY TO RESPOND TO PROBABLY SOME
OF THE IMPACT OF THE TECH SECTO
CHANGES IN THEIR LOCAL
ECONOMIES, AS WELL. IS THERE AN
OTHER JURISDICTION THAT WE ARE
WORKING WITH TO TRY TO DO SOME
FORECASTING IN A PRETTY VOLATIL
SECTOR WITH OUR COLLEAGUES
ACROSS THE NATION?
>> WE'VE BEEN IN TOUCH WITH
SOME OF THE REGIONAL FOLKS HERE
BUT YOU MADE A REALLY GOOD
POINT, I HAD A CONTACT IN SAN
FRANCISCO, WHICH IS ANOTHER
PLACE THAT IS LIKELY
EXPERIENCING MUCH OF THE SAME.
I HAVE HAD AN OPPORTUNITY IN TH
PAST COUPLE WEEKS , I THOUGHT
THAT WOULD BE A GOOD IDEA.
SUGGESTION NOTED, AND A GOOD
ONE. INTERESTINGLY, SAN
FRANCISCO IS EVEN MORE DEEPLY
IMPACTED BECAUSE THE WAY THEIR
PROPERTY TAXES WORK AS REAL
ESTATE VALUES FALL, THEIR
REVENUES FALL. THEY HAVE
SIGNIFICANT CONCERNS ABOUT
ESSENTIALLY THE ASSESSED VALUE
OF THE DOWNTOWN CORE. BUT
UNDERSTANDING WHAT THEY ARE
SEEING IN EMPLOYMENT TRENDS I
THINK COULD BE IMPORTANT FOR US
AS WELL, SO THAT'S A REALLY GOO
IDEA.
>> I ALSO WANTED TO THANK SOME
OF THE FOLKS FROM THE EXECUTIVE
BRANCH CBO AND CENTRAL STAFF
WHEN WE WERE INITIALLY CRAFTING
JUMPSTART'S PROGRESSIVE PAYROLL
TAX, THE UPPER LIMITS OF THE
ANTICIPATED AMOUNT WERE $214
MILLION, BECAUSE WE WANTED TO B
CAUTIOUS IN OUR ASSESSMENT. SO
STILL HAPPY TO SEE THAT WE ARE
OVERPERFORMING, EVEN WITH THESE
PROJECTED FORECASTS IN THE OUT
YEARS. IF NOTHING , THE INITIAL
FORECAST WAS GOOD TO BE
CONSERVATIVE, AND WE APPRECIATE
ALL THE EARLY WORK YOU DID ON
ALL THIS.
>> SO WITH THAT AS I SHIFT TO
REIT AND SPEND A LITTLE TIME
THERE, THERE'S ANOTHER
SIGNIFICANT CHANGE. SO I
APOLOGIZE FOR ALL THE WORDS ON
THIS ONE. A LOT OF STORY HERE T
TELL. LET ME START BY JUST
TALKING ABOUT THE CHART ON THE
RIGHT. IT SAYS A LOT ABOUT
WHAT'S GOING ON HERE. IN THE
BARS YOU HAVE THE TOTAL QUANTIT
OF HOME SALES AND THAT'S
MEASURED IN THOUSANDS, MEASURED
ON THE LEFT AXIS. SO IN 2021,
50,000 HOMES SOLD IN T-1 AND I
VERY KIND OF NUMBERS. YOU SAW
IT FELL OFF IN THE MIDDLE OF
LAST YEAR, SO WE ARE DOWN IN TH
NEIGHBORHOOD OF 23,000 UNITS,
SOMETHING LIKE THAT. AND THEN
THE FORECAST GOING FORWARD, AND
THIS IS FOR A REGIONAL FORECAST
THESE ARE NOT JUST THE CITY. AN
WHAT THE FORECAST GOING FORWARD
IS THAT THE VOLUME OF ACTIVITY,
AND AGAIN, REIT IS TAX ON
TRANSACTIONS, SO IT'S PRICED ON
QUANTITY IS WHAT DRIVES REVENUE
SO HOW MANY HOMES ARE SELLING
AND AT WHAT PRICE. BOTH THOSE
ELEMENTS ARE REFLECTED IN THE
CHART. SO EXPECTATION AND
REGIONAL BASIS IS THE SAME ON A
NATIONAL LEVEL, IS THAT WE ARE
NOT GOING TO SEE A HUGE AMOUNT
OF GROWTH , A LOT OF THINGS
GOING ON HERE. HIGH INTEREST
RATES MEAN CONTRACTORS BORROW
MONEY TO BUY A HOUSE. IF YOU OW
THE HOUSE AND YOU HAVE A LOW
INTEREST RATE, IT'S ALSO NOT A
GREAT TIME TO SELL, BECAUSE YOU
HAVE TO GIVE UP YOUR MORTGAGE.
YOU DON'T GET TO TRANSFER YOUR
MORTGAGE TO YOUR NEW HOUSE. A
LOT OF PEOPLE ARE MORTGAGE
LOCKED BECAUSE IT'S JUST TOO
ADVANTAGEOUS TO STAY WHERE THEY
ARE. THERE'S LESS DEMAND BECAUS
PEOPLE ARE WORRIED ABOUT
INTEREST RATES, BUT THERE'S ALS
LESS SUPPLY BECAUSE FEWER WANT
TO SELL, INTERESTINGLY FOR THE
SAME REASON. SO THAT'S ACTUALLY
ONE REASON WHERE PRICES ARE
PREDICTED TO DROP. BUT NOT A
WHOLE LOT. I SHOWED YOU THE
CHART BEFORE. THAT WAS REALLY
FROM THE PEAK HERE, PRICES LOOK
TO BE RELATIVELY STABLE BECAUSE
SUPPLY AND DEMAND ARE BOTH
CLIMBING. BUT THE VOLUME OF
TRANSACTIONS DROPPING A LOT. SO
THAT'S THE RESIDENTIAL SIDE.
THAT'S A BIG PART OF OUR
REVENUES. THE OTHER THING THAT'
ON THE COMMERCIAL SIDE, WE ARE
SEEING SOME OF THE SAME ISSUES
SO INTEREST RATES MEAN IT'S HAR
TO MAKE A COMMERCIAL PURCHASE.
THE OFFICE PART OF THIS AND TH
UNCERTAINTY ABOUT THE OFFICE
MARKET IS A BIG PART OF THIS.
SO NONTRIVIAL SHARE OF OUR
REVENUES YEAR TO YEAR HAD BEEN
THE SALE OF LARGE OFFICE ASSETS
OFFICE TOWERS IN THE CITY. THEY
ARE OFTEN OWNED BY A REAL
ESTATE INVESTMENT TRUST, WHO
REALLY TREAT THEM AS INVESTMEN
VEHICLES. WE HAVEN'T SEEN A SAL
OF MORE THAN $100 MILLION,
WHICH WOULD BE A SMALL TOWER,
GOING ON A YEAR. INTEREST RATES
ARE HIGH. I THINK PART OF IT,
NOBODY QUITE KNOWS WHAT THE
TOWER IS WORTH , AND THE BUYERS
AND THE SELLERS CERTAINLY CAN'T
AGREE ON WHAT THEY ARE WORTH.
SELLERS POTENTIALLY OWE A FAIR
AMOUNT OF MONEY WHEN THEY PUT U
A BUILDING OR BOUGHT A BUILDING
RECENTLY. IT'S PROBABLY WORTH
LESS. IT MIGHT BE WORTH LESS
THAN THEY PAID. THAT MARKET
APPEARS TO BE A LITTLE FROZEN,
AS WELL. I POINT YOU OVER THE
WEEKEND THAT HIGHLIGHTED SOME O
THESE ISSUES. SO THIS IS ABOUT
THE COMMERCIAL SIDE AND ABOUT
THE RESIDENTIAL SIDE ARE BEING
NEGATIVELY AFFECTED. WE BROUGH
THE FORECAST DOWN IN NOVEMBER.
JUST TO REMIND YOU THAT WE HAD
BEEN PREDICTING AS MUCH AS 95.
WE BROUGHT IT DOWN TO 68. WE AR
BRINGING IT DOWN YET AGAIN
BECAUSE THE DECLINE HAS
CONTINUED. IN FACT, INITIAL
RESULTS FOR JANUARY, FEBRUARY,
AND MARCH, THEY WOULDN'T HAVE
MET OUR NOVEMBER FORECAST OR
GOTTEN CLOSE. WE REDUCED THE 23
FORECAST FROM 68 MILLION TO 55
MILLION. THE 24th FORECAST FROM
69 TO 60. THE NEXT SLIDE I'M
GOING TO SHOW YOU, THE
LONGER-TERM . BEFORE WE DO THAT
I DO WANT TO EMPHASIZE THAT WE
ARE NOT THE ONLY ONE SEEING
THIS, AND IT'S NOT JUST ISOLATE
TO THE CITY. SO STATE REVENUE
FORECAST OFFICE PUT UP A REVISE
FORECAST LAST MONTH. THERE WAS
SIGNIFICANT DECLINE, FOR THEM,
23, 25, IT STARTS IN JULY. THEY
ARE A FORWARD-LOOKING FORECAST
WE FOUND 700 MILLION. BUT MORE
THAN HALF OF THE DECLINE WAS
CHANGES IN REIT BECAUSE THE
SPEED WITH WHICH REIT REVENUES
DECLINED CAUGHT US ALL
OFFGUARD. THE COUNTY, THEY
COLLECT REIT ON UNINCORPORATED
KING COUNTY, SO A MUCH SMALLER
BASE, BUT THEY ARE SEEING SOME
EFFECT AS WELL. THIS IS
SOMETHING THAT'S SYSTEMIC TO AL
OF US WHO ARE RELYING ON THESE
REAL ESTATE TRANSACTIONS FOR
REVENUES. THE NEXT SLIDE , GOOD
JOB HIGHLIGHTING --
>> WHEN THE SEATTLE TIMES ASKE
ABOUT THE MHA, THE MANDATORY
HOUSING AFFORDABILITY , AND
LOWER THAN ANTICIPATED RETURNS
AS WELL, I REFERENCED THE SLIDE
YOU BROUGHT UP IN AUGUST AND
NOVEMBER LAST YEAR. SO I JUST
WANTED TO REITERATE FOR THE
GROUP HERE AS WELL THAT THAT
WAS MY UNDERSTANDING, AND IF
THAT NEEDS TO BE CORRECTED, OF
COURSE LET ME KNOW, BUT THAT'S
WHAT THE ASSUMPTION WAS.
>> YOU ARE SEEING LESS
MULTIFAMILY DEVELOPMENT AND
AGAIN THE SAME UNDERLYING
INTEREST RATE AND MARKET
DEMANDS. SO THIS IS COMPARING
THE REIT FORECAST, THIS IS SORT
OF ANALOGOUS TO THE CHART WE HA
ON PAYROLL EXPENSE TAX. THIS IS
2022 ACTUAL S. THING TO REMEMBE
HERE IS HOW QUICKLY THEY DROPPE
OFF. WE ACTUALLY SUSTAINED
ALMOST $95 MILLION IN REVENUE I
2022. BUT THE MAJORITY OF IT
CAME IN THE FIRST HALF OF THE
YEAR, NOT THE SECOND. SO WE'VE
REVISED THE FORECAST. NOVEMBER
WE BROUGHT IT DOWN, WE ARE
BRINGING IT DOWN AGAIN FURTHER
AND BRINGING IT DOWN FROM NOT
JUST 23 AND 2024, PARTICULARLY
RELEVANT FOR REIT FORECAST
BECAUSE THIS MONEY IS SPENT ON
CAPITAL. REALLY YOU ARE LOOKING
OUT A FEW YEARS TO PROGRAM ITS
USE BECAUSE THE TIME IT TAKES T
DEVELOP AND IMPLEMENT CAPITAL
PROJECTS. SO THIS IS GOING TO
RIPPLE THROUGH THE OUT YEARS IN
THE FORECAST AS WELL. WE DO
EVENTUALLY GET BACK TO SOME
GROWTH. IN 2027 WE START TO PIC
BACK UP AND RETURN TO THE LEVEL
THAT PREVIOUSLY HAD BEEN
FORECAST. JUST BASICALLY BOTH
THE INTEREST RATE WILL HAVE COM
BACK DOWN AND ALSO THE ECONOMY
WILL BE MOVING ON WHAT THIS
STAGNATION PERIOD AND BACK INTO
GROWTH. AND I SEE ALLIE WITH
HER HAND UP. TOM , SORRY TOM,
I'M MISREADING MY SCREEN. PUT
THE HAND ABOVE YOUR HEAD BUT
IT'S ACTUALLY TOM'S HEAD.
>> OKAY. I'M JUST CURIOUS, SO
I'M NOT SURE IF 2022 IS THE PEA
FOR COLLECTIONS IN THIS CYCLE.
BUT I'M CURIOUS HOW THIS APRIL
FORECAST DECLINE COMPARES WITH
THE PEAK TO TROUGH DECLINE WIT
THE GREAT RECESSION, WHICH WAS
AS WE WILL RECALL, VERY STEEP.
IS IT STEEPER OR LESS STEEP THA
THAT DECLINING EXPERIENCE ABOU
10 YEARS AGO?
>> IN TERMS OF ACTUAL -- IN
TERMS OF FORECAST, IT'S A LITTL
BIT SMALLER BUT STILL A
SIGNIFICANT DECLINE, A VERY
SIGNIFICANT DECLINE , SOMETHING
LIKE 40% . IT DOES REALLY FEE
LIKE THE SWITCH HAS GOTTEN
TURNED OFF, IF YOU WILL. PART
OF THAT IS BECAUSE IRONICALLY,
THE ANTICIPATION THAT INFLATIO
AND INTEREST RATES ARE GOING TO
COME DOWN SOON. I THINK THEY
START IN THE RESIDENTIAL MARKET
FOLKS ARE KIND OF WAITING TO SE
HOW THIS PLAYS. SO IF I WAIT
ANOTHER YEAR, I MIGHT BE MORE
-- I'M A SELLER, I'LL BE ABLE T
GET A LOW INTEREST RATE AND I
CAN MOVE TO A BIGGER HOUSE
WITHOUT HAVING TO TAKE ON A HIG
INTEREST RATE. OPPOSITE FOR
BUYERS. SIMILAR TO STANDING ON
THE SIDELINES WAITING FOR THIS
THING TO CORRECT, AND WE'LL SEE
IF IT DOES. THE DIFFERENCE
THERE, IN THE GREAT RECESSION,
JUST TO REMIND FOLKS, THE CREDI
MARKETS FROZE UP ENTIRELY SO YO
COULDN'T GET A LOAN. NOW IT'S
JUST EXPENSIVE AND WE ARE HAVIN
SOME WEIRD DYNAMICS ABOUT THE
TIMING OF THAT. BUT NONETHELESS
CANDIDLY CAUGHT OFF GUARD BY HO
QUICKLY THIS CAME DOWN. I DO
THINK THAT THE WORK FROM HOME
AND PANDEMIC DYNAMICS ON THE
COMMERCIAL SIDE ARE A VERY
UNUSUAL EFFECT, AS WELL, AND W
SPENT SOME TIME TALKING TO SOME
BROKERS. THERE IS ACTUALLY AN
ARTICLE IN THE WALL STREET
JOURNAL, THE NEW YORK TIMES AS
WELL ABOUT OFFICE MARKETS
NATIONWIDE AND SOME REAL
CONCERN. OUR VACANCY RATES ARE
MUCH HIGHER COMPARED TO THE
NATION AS A WHOLE, BUT THE
NATION AS A WHOLE IS ALSO SEEN
SOMEWHAT HIGHER VACANCY RATES
AND CONCERNED ABOUT REFINANCING
IN THESE MARKETS AND THE LIKE .
SO THAT'S THE DETAIL ON THE REI
FORECAST AND THAT'S ACTUALLY TH
END OF OUR PRESENTATION. THE
IMPORTANCE OF THE GENERAL FUND,
THAN ON GENERAL FUND AND AN
OPPORTUNITY TO GET EVEN MORE
DETAIL ON BOTH PAYROLL EXPENSE
IS, JUMPSTART PAYROLL ATTACKS
AND REIT. HIGH-LEVEL GENERAL
FUND UP BUT NOT REALLY FOR THE
LONG-TERM, AND SIGNIFICANT
DOWNWARD ADJUSTMENTS IN THE
JUMPSTART AND REIT FORECAST. W
WILL OBVIOUSLY CONTINUE TO
MONITOR THESE AND WILL BE BACK
IN AUGUST WITH AN UP DATE BEIN
INFORMED BY THE NEXT FEW MONTHS
OF REALIZED REVENUES AND THEN
OVERALL ECONOMIC ACTIVITY.
>> ALL RIGHT, THANK YOU DIRECTO
NOBLE. IS THERE ANY QUESTIONS ,
ADDITIONAL QUESTIONS YOU DIDN'T
GET A CHANCE TO ASK THROUGHOUT
THE PRESENTATION? THAT IS TRUE
OF OUR ENTIRE PEOPLE HERE, FOR
EVERYBODY WHO IS WITH US. WE'LL
ASK ANY QUESTIONS. GO AHEAD.
>> I'M SORRY ABOUT THAT, ALLIE.
I WAS JUST GOING TO ASK, SHOULD
WE FORMALLY ADOPT THE BASELINE
AS RECOMMENDED ON PAGE 14 OF
THE FORECAST RECOMMENDS USING
THE BASELINE ECONOMIC SCENARIO
FOR THE APRIL 2023 FORECAST .
SHOULD WE ADOPT THAT?
>> YES. I WILL TAKE THAT AS A
MOTION FOR ITEM NUMBER 20 OF
OUR AGENDA. BUT BEFORE WE GET T
ACCEPTING THE REVENUE FORECAST
AS PRESENTED, AND I WILL COME
BACK BUT AS I'M GOING TO TAKE
THAT AS A MOTION, SENIOR DEPUTY
MAYOR. BEFORE WE GET INTO THAT,
JUST VERY BRIEFLY TO INFORM THA
DISCUSSION, ADDITIONAL COMMENTS
OR QUESTIONS, DEPUTY DIRECTOR
PENNUCCI, DID YOU HAVE SOMETHIN
ELSE YOU WANTED TO ADD FOR THE
PURPOSE OF DISCUSSION?
>> THANKS FOR THE PRESENTATION,
DIRECTOR. I JUST WANTED TO PUT
THIS IN SOME CONTEXT OF SORT OF
A MIXED SET OF NEWS ON DIFFEREN
REVENUE SOURCES . THERE IS A
PLAN FOR THE BIENNIUM THAT IS
CURRENTLY BUDGETED . THIS CHANG
IS THAT LANDSCAPE A BIT AND I
JUST WANT TO REALLY APPRECIATE
THE WORK THAT DIRECTOR NOBLE'S
SHOP DOES IN HIGHLIGHTING SOME
OF THE NUANCES AND DIFFICULTIES
IN DOING THIS FORECASTING WORK.
JUST FOR CONTEXT, I WANT TO
BRING IT BACK . THE DECISION
MAKERS THINK ABOUT HOW TO
ADDRESS THIS NEWS. THERE ARE A
LOT OF MOVING PIECES. IN
NOVEMBER, THE COUNCIL ADJUSTED
THE PLAN FOR THE BIENNIUM BASED
ON THE NOVEMBER FORECAST, WHICH
HAD SWEETENED BEVERAGE TAX
REVENUE SLIGHTLY DOWN. THIS
UPDATE INCREASES THEM A LITTLE
BIT. IT WAS USED TO BACKFILL FO
THAT FORECAST ISSUE IN NOVEMBER
NOW DOWN A LITTLE BIT. THERE
WAS AN INCREASE IN THE TRANSFER
FROM THE PAYROLL TAX TO THE
GENERAL FUND, BECAUSE GENERAL
FUND REVENUES WERE PROJECTED TO
BE DOWN A BIT IN NOVEMBER. NOW
THEY ARE UP A LITTLE BIT. SO
JUST ABOUT A LOT OF MOVING
PIECES HERE. SO THERE ARE BOTH
SORT OF SHORT-TERM DECISIONS TO
THINK ABOUT IN TERMS OF
BALANCING THE BIENNIUM AND
TRYING TO HOLD TO THE
COMMITMENTS MADE IN THE ADOPTED
AND ENDORSED BUDGETS, AS WELL A
LONGER-TERM THINKING ABOUT OUR
POLICIES, PARTICULARLY AROUND
RESERVES, SO THAT THE CITY IS
BETTER SITUATED TO RESPOND TO
FLUCTUATIONS IN CHANGING
REVENUES IN THE SHORT TERM.
>> THANK YOU VERY MUCH. GREAT.
YOU HAVE GIVEN US SOME GOOD FOO
FOR THOUGHT AS WE CONTINUE TO
EVOLVE THIS GROWING NEW BODY.
REALLY APPRECIATE THE COLLECTIV
WORK WE ARE DOING HERE ACROSS
BRANCHES TO TAKE THESE ISSUES O
TOGETHER. OKAY. I DON'T SEE ANY
ADDITIONAL HANDS. SENIOR DEPUTY
MAYOR MONISHA HARRELL HAS --
EXCUSE ME, PLEASE GO AHEAD,
DIRECTOR DINGLEY.
>> I APOLOGIZE, CAN YOU ALL HEA
ME OKAY? I'VE HAD SOME
CONDUCTIVITY ISSUES ON MY END.
GREAT, SEEING HEAD NODS. THANK
YOU. I THINK I HEARD ALLIE MAKE
SOME POINTS THAT I -- I'M
SORRY, DEPUTY DIRECTOR PENNUCCI
WAS MAKING, THAT I WAS GOING TO
GO TO ALSO REITERATE, SO THIS I
A LITTLE BIT OF REPETITION. JUS
BLAME THE TERRIBLE WI-FI WHERE
AM. SO THANK YOU VERY MUCH,
DIRECTOR NOBLE AND TEAM, FOR AL
THIS WORK, AND TO DAVE AND ALEX
ON MY TEAM AND SEE PO FOR THIS
WORK ON THIS FORECAST. THIS
FORECAST DOES PRESENT -- I
THINK A CONTINUATION OF THE
UNCERTAINTY THAT WE'VE BEEN
SEEING OVER THE LAST YEAR WHERE
WE JUST ARE SEEING DIFFERENT
ECONOMIC INDICATORS POINTING IN
DIFFERENT DIRECTIONS. AND AS YO
HEARD, I THINK YOU HEARD DEPUT
DIRECTOR PENNUCCI INTIMATING A
LOT OF THESE REVENUES ARE GOING
IN DIFFERENT DIRECTIONS. YOU
PRESENT A REAL CHALLENGE IN THE
BUDGETING SPACE, AS YOU THINK
ABOUT WHAT DOES IT MEAN TO HAVE
THAT SHORT-TERM GROWTH, BUT JUS
IN LITERAL, JUST THIS YEAR, BU
LONG-TERM STAGNATION. IN THE
BUDGETING SENSE, AS YOU SAW
DIRECTOR NOBLE'S CHART WHERE TH
BUYING POWER OF THE CITY
INCREASES OVER TIME, EVEN IF YO
WERE TO HOLD A BUDGET FLAT FOR
THE NEXT FIVE YEARS, THAT IS TO
SAY NO NEW PROGRAMS, YOU WOULD
STILL BE IN A SCENARIO FOR A
BUDGET PERSPECTIVE WHEN YOU HAV
TO MAKE REDUCTIONS, BECAUSE THE
COST OF PROVIDING SERVICES
INCREASES OVER TIME. I DON'T
MEAN TO BE OVERLY PEDANTIC ABOU
THAT POINT, BUT IT'S SOMETHING
FOR US TO ALL KEEP IN MIND AS W
ARE LOOKING AT WHAT LOOKS LIKE
MORE NEAR-TERM BETTER NEWS IN
2023, BUT THAT STAGNATION IS
REAL AND PERSISTENT ACROSS QUIT
A FEW YEARS AND OUT YEARS. SO I
ALSO APPRECIATE CARE MOSQUEDA ,
THAT THIS IS A LOT OF FOOD FOR
THOUGHT AS WE CONTINUE TO HAVE
THOSE CONVERSATIONS. I
APPRECIATE YOU AND YOUR TEAM'S
PARTNERSHIP IN THOSE
CONVERSATIONS AS WE MOVE
FORWARD. THANK YOU ALL VERY
MUCH, APPRECIATE THE
PRESENTATION.
>> WONDERFUL THANKS, DIRECTOR
DINGLEY. I'M GOING TO SECOND
WHAT I BELIEVE SENIOR DEPUTY
MAYOR HAROLD NOTED, WHICH WAS T
ACCEPT THE RECOMMENDATION PER
THE ORDINANCE CREATED BY THE
OFFICE OF REVENUE FORECAST AND
THE FORECAST COUNCIL. IT'S THIS
BODY'S ROLE TO REVIEW THE
PRESENTATION AND TO REVIEW THE
RECOMMENDATIONS. IF WE BELIEVE
IT'S APPROPRIATE, WE CAN APPROV
THE RECOMMENDED FORECAST THAT
WAS REPRESENTED TODAY. APPROVAL
OF THE RECOMMENDED FORECAST DOE
NOT REQUIRE A FORMAL VOTE .
THERE IS A CONSENSUS OR A
CONCURRENCE THAT WE WILL SEEK
HERE TODAY AND WE CAN THEN
DIRECT THAT THE MEETING MINUTES
REFLECT AN AGREEMENT. BUT IF
THERE IS A DESIRE TO ADOPT AN
ALTERNATE FORECAST SCENARIO,
WHICH I DON'T WANT TO DISPARAGE
ANYBODY FROM DOING, BUT THE
PROCESS THAT WOULD BE THAT WE
WOULD GO ON SUCH A PROPOSAL. I
HAVE HEARD INTEREST IN ADOPTIN
THE BASELINE AS RECOMMENDED IN
OUR FORECAST PRESENTATION
TODAY. I WILL SECOND THAT AND
I'M INTERESTED TO HEAR IF THERE
IS ANY ADDITIONAL CONVERSATION
ABOUT THAT. I'M NOT HEARING AN
ADDITIONAL CONVERSATION. IT HAS
BEEN MOVED AND SECONDED. IF
THERE'S NO OBJECTION, THE
FORECAST RECOMMENDATION AS
PRESENTED TO MOVE FORWARD WITH
THE BASELINE WILL BE INCURRED
UPON. PLEASE HAVE A MEETING
MINUTES REFLECT THAT WE HAVE
CONCURRED WITH THE
RECOMMENDATION FOR TODAY AND W
KNOW THAT THIS IS A VERY
ITERATIVE PROCESS. LOOK FORWARD
TO HEARING MORE, NOT FROM THE
CONVERSATION THAT YOU HAVE WIT
SIMILARLY SITUATED CITIES IN
TERMS OF PRESENCE OF THE TECH
SECTOR AND OTHER LOCAL ECONOMIE
SUCH AS SAN FRANCISCO. IF
THERE'S ANY NEED FOR UP DATES
MIDWAY BETWEEN NOW AND AUGUST,
OF COURSE WE WOULD WELCOME THAT
WE DON'T IS INTUBATE MEETING
UNTIL AUGUST. OUR AUGUST
FORECAST MEETING WILL BE AT 2:0
P.M. THIS TIME. 2:00 P.M. ON
AUGUST 10th. AND AGAIN, WE WIL
SHOW THAT INFORMATION IS
PROJECTED OUT TO MEMBERS OF THE
PUBLIC. THIS IS GOING TO BE A
CRITICAL FORECAST FOR THE
EXECUTIVE TO MAKE ANY
ADJUSTMENTS TO OUR ENDORSED 202
BUDGET. THIS IS THE SECOND PART
OF OUR EFFORT TO CREATE A
BIENNIAL BUDGET PROCESS IN THIS
TWO YEAR ROUND, WHICH I VERY
MUCH APPRECIATE TO CREATE
GREATER STABILITY IN BOTH HOW W
GOVERN AND ALSO HOW WE BUDGET.
AND SO I THINK THAT THIS IS A
GOOD CHANCE FOR US TO MAKE SURE
THAT WE HAVE ALL THE INFORMATIO
AS MUCH AS POSSIBLE BEFORE THAT
EXECUTIVE TRANSMITS ANY CHANGE
SO THAT WE HAVE A BALANCED
BUDGET, A CONTINUOUS BALANCED
BUDGET FOR THE 2024 LATTER HALF
OF OUR BIENNIAL PROCESS HERE.
ANY ADDITIONAL QUESTIONS OR
COMMENTS FOR THE GOOD OF THE
ORDER?
>> I JUST WANTED TO SAY I
REALIZED I JUMPED DIRECTLY TO
THE MOVE TO ADOPT WITHOUT
EXPRESSING MY GRATITUDE TO THE
FORECAST TEAM. I KNOW THAT THI
IS A LOT OF HARD WORK,
ESPECIALLY WITH THINGS THAT ARE
CHANGING REALLY QUICKLY AND HO
THE NATIONAL LANDSCAPE IMPACTS
THE LOCAL LANDSCAPE, AND HOW OU
SITUATIONS ARE A LITTLE BIT
DIFFERENT WITH OUR -- YOU KNOW
WE HAVE A LARGE SEGMENT OF TECH
AND OTHERS. AND ALSO WHAT LOOKS
LIKE THE GOOD NEWS FROM ALL OF
THIS, WHAT LOOKS LIKE A GROWING
HOSPITALITY AND TOURISM SEGMEN
THAT WILL CERTAINLY HELP SOME O
THE LOCAL DOWNTURN. SO THANK YO
TO OUR FORECAST DEPARTMENT. I
KNOW AGAIN, I JUMPED STRAIGHT T
THE BUSINESS WITHOUT
ACKNOWLEDGING ALL OF YOUR HARD
WORK . I REALLY APPRECIATE THE
TEAM IN BRINGING EVERYTHING TO
US TODAY.
>> MUCH APPRECIATED. WE ARE
BUSINESS OUTCOME ORIENTED
OURSELVES, SO COMPLETELY
UNDERSTAND. YOU WANT TO
ACKNOWLEDGE THE WORK THEY DO AN
AGAIN, OUR DEFENSE IS REALLY
IMPORTANT BUT ALSO AS A
COLLABORATION OF THE CENTRAL
STAFF AND BUDGET OFFICE, AND
ALSO THE FINANCE DEPARTMENT AS
WELL. JAMIE AND HER ENTIRE
TEAM, WE WERE VERY MUCH HAND IN
GLOVE ON A LOT OF ISSUES. WE
WILL CONTINUE TO KEEP AT IT AND
WE'LL SEE YOU IN AUGUST AND IF
SOMETHING COMES UP BEFORE WE'L
LET YOU KNOW.
>> THANK YOU, AND I WANT TO ECH
SENIOR DEPUTY MAYOR'S COMMENTS
AS WELL, AND THANK DIRECTOR
DINGLEY OR DEPUTY DIRECTOR
PENNUCCI AND TOM MIKESELL,
BUDGET LEAD, AS WELL AS THE TEA
AT OFFICE OF ECONOMIC AND
REVENUE FORECAST FOR ALL THE
WORK YOU'VE DONE CHIMING IN
TODAY. I THINK OVERALL WE ARE
WELL PREPARED TO DEAL WITH THIS
WE ARE ALL APPRECIATIVE OF THE
TOUGH SITUATION IN FRONT OF US,
AND THE CHANGING NATURE BOTH
LOCALLY AND NATIONALLY. BUT
WHILE IT'S NOT IDEAL NEWS TODAY
A $6.7 MILLION SHORTFALL OUT OF
A $7.4 BILLION BUDGET I THINK
IS MANAGEABLE, ESPECIALLY WITH
THE COLLECTIVE PARTNERSHIP THAT
WE HAVE BEEN GROWING WITH THE
EXECUTIVE, AND I KNOW THAT WE
WILL BE WORKING VERY HARD TO
MAKE SURE THAT IF THERE'S ANY
ADDITIONAL INFORMATION FROM TH
REVENUE FORECAST, THAT THAT
INFORMATION CONTINUES TO BE
SHARED SIMULTANEOUSLY WITH THE
EXECUTIVE AND THE LEGISLATIVE
BRANCH. THAT'S THE PURPOSE OF
THIS BODY. SO I THINK THAT THIS
IS A REALLY GREAT WAY TO
COOPERATE TIES, MAKING SURE THA
BOTH BRANCHES GET ACCESS TO
INFORMATION AT THE SAME TIME, A
WELL AS MEMBERS OF THE PUBLIC.
AND I WANT TO THANK YOU ALL ON
THE REVENUE FORECAST WHO WAS
JUST IN THE FIRST YEAR LAST YEA
AS THEY WERE WORKING ON THE
23-24 BY ANNUAL BUDGET. WE HAV
TO HEAR FROM THE OFFICE OF
FORECAST THROUGH THIS MEETING.
WE KNEW THERE WOULD BE SOME
POTENTIAL FOR VOLATILITY IN OU
NOVEMBER FORECAST. WE DID SOME
-- AS I NOTED, WE DID SOME
ACCOUNTING FOR THAT IN THE
2023-2024 BUDGET, TO NOTE THAT
WE WANTED TO BE ABLE TO IDENTIF
ADDITIONAL REVENUE TO BALANCIN
THE OUT YEAR. SO WEARING OTHER
HATS, SENIOR DEPUTY MAYOR AND I
HAVE BEEN VERY BUSY TRYING TO
PLAN FOR SOME OF THE WAYS THAT
THE FUTURE YEARS COULD BALANCE
AND APPRECIATE OUR PARTNERS AT
THE TABLE AND THE ONGOING
CONVERSATIONS THAT WE HAD WITH
MEMBERS OF THE COMMUNITY AND
FRONT-LINE WORKERS. WE ARE ALL
COLLECTIVELY INTERESTED IN
HELPING TO ADDRESS THIS
NEAR-TERM $6.7 MILLION SHORTFAL
AGAIN IN THE SCHEME OF THINGS,
NOT TO UNMANAGEABLE IN THE NEA
TERM, AND AS WE LOOK AT THOSE
LARGER NUMBERS YOU SHOWED IN TH
OUT YEAR, RECOGNIZING THAT
ESPECIALLY JUMPSTART WAS
CODIFIED TO GO INTO THE STEM
PLAN. WE ARE COLLECTIVELY
WORKING TO MAKE SURE OUR
COMMITMENTS REMAIN ON TRACK .
LOTS OF MOVING PARTS ON THIS.
THIS IS ONE OF THEM, AND WE
REALLY APPRECIATE YOUR WORK.
LET ME SEE DIRECTOR NOBLE. THE
OTHER THING I WOULD ASK IS IF
YOU HAVE ANY ADDITIONAL
INFORMATION TO COMPARE THE
STATE REVENUE FORECAST
PROJECTIONS AND SORT OF A WE AR
SEEING LOCALLY THAT WOULD BE
VERY HELPFUL. YOU KNOW THAT
THEIR GENERAL FUND ALSO SHOWS A
UPTICK, AS YOU ARE SHOWING US A
GENERAL FUND UPTICK IN THE
INTEREST RATE REVENUE SOURCES
THAT THE STATE LEVEL. WOULD BE
INTERESTED IN CONTINUING TO
TRACK ANY ANALYSIS YOU MIGHT
HAVE. DOESN'T HAVE TO BE FORMAL
BUT IF THERE'S ANYTHING THAT YO
ALSO WANT TO ADD, GIVEN WHAT
THEIR RECENT FORECAST WAS, OF
COURSE WE'D BE HAPPY TO RECEIVE
THAT INFORMATION.
>> I COULD EMAIL IT, MUCH THE
SAME. THEY HAD NEAR-TERM UPTICK
BUT THEN THE LONGER-TERM
PROJECTIONS ARE FOR SLOW GROWTH
AND OFF A LITTLE BIT. WE MAKE
THAT A LITTLE MORE QUANTITATIVE
AND SEND OUT SOME EMAIL TO GIVE
YOU -- KIND OF PUT THAT IN SOM
PERSPECTIVE.
>> COLLEAGUES, THANK YOU SO
MUCH. WE WERE ACTUALLY WITHIN
TIME , VERY DENSE PRESENTATION
THIS MORNING. WE HAD REACHED TH
END OF OUR FORMAL AGENDA AGAIN.
AUGUST 10th AT 2:00 P.M. IS OU
NEXT FORECAST COUNCIL MEETING.
IF THERE IS ANY UPDATES OR
URGENT NEED FOR ADDITIONAL
INFORMATION FOR THE FORECAST
COUNCIL, DIRECTOR NOBLE HAS
INDICATED THAT HE WILL BE
NOTIFYING US AND ALSO SENDING
US INFORMATION TO RECONVENE, IF
NECESSARY. BUT IF THERE'S NO
FURTHER QUESTIONS, THANK YOU AL
FOR JOINING US THIS MORNING AND
HAVE A GREAT REST OF YOUR WEEK.
THIS MEETING IS ADJOURNED.