THE SEATTLE CITY COUNCIL . THAN
YOU FOR BEING HERE. --
FROM THE OFFICE OF REVENUE
FORECAST. WELCOME TO BEING A
MEMBER OF THE FORECAST COUNCIL.
IS THERE ANYTHING YOU WOULD LIK
TO SAY?
>> YES, OF COURSE. THANK YOU
FOR THE WARM WELCOME INTO MY NE
ROLE. SENIOR DEPUTY MAYOR HAS
BEEN AN INVALUABLE ASSET AT THE
MAYORS OFFICE. I KNOW I HAVE
HUGE SHOES TO FILL. I WOULD
FIRST LIKE TO GIVE THANKS FOR
THE QUALITY WORK FROM THE
ECONOMIC AND REVENUE FORECAST
OFFICE TEAM AND THE CITY BUDGE
OFFICE. THE INFORMATION THEY
PROVIDE WILL OFFER THE
GUARDRAILS THAT COUNCIL MEMBERS
AND THE MAYOR OPERATE WITHIN A
WE CRAFT AND REFINE THE CITY
BUDGET. WE DON'T HAVE UNLIMITE
MONEY, BUT WE DO HAVE UNLIMITED
DEMANDS, WHICH IS A WHY IT IS
INCUMBENT UPON ALL OF US TO
RECEIVE THIS NEUTRALLY PROVIDED
INFORMATION AND MAKE OURSELVES
DECISIONS ACCORDINGLY. I THINK
CHAIRMAN MOSQEDA CAN ATTEST THE
BUDGET DEVELOPMENT WORK LAST
YEAR WAS LIGHT, AND I HOPE WE
CAN CONTINUE TO BUILD ON A
STRONG FOUNDATION TO MAKE THE
IMPORTANT CHOICES THAT WILL
BENEFIT THE LIVES OF THOUSANDS
OF SEATTLEITES. I AM GLAD TO
JOIN THE ESTEEMED COUNCIL AND
LOOK FORWARD TO ACTING ON THE
INFORMATION TO COME. THANK YOU
VERY MUCH.
>> THANK YOU. A WARM WELCOME TO
YOU AS WELL. I WOULD CONCUR WIT
YOUR COMMENTS ABOUT THE
COLLABORATIVE EFFORT WITH
LEGISLATIVE AND EXECUTIVE
COLLEAGUES WORKING IN A
TRANSPARENT WAY BETWEEN BRANCHE
OF THE GOVERNMENT AND WITH
MEMBERS OF THE PUBLIC AS WE
SOLVE THE LOOMING DEFICIT
BETWEEN REVENUE AND EXPENSES AN
SEEK TO SCALE UP SERVICES FOR
THE INCREASED POPULATION SIZE
AND ONGOING INCREASED NEEDS,
ESPECIALLY EXACERBATED DURING
THE PANDEMIC. ALL OF THIS TIES
IN. IT IS A VERY EXCITING
OPPORTUNITY TO HEAR FROM
INDEPENDENT OFFICE, THE OFFICE
OF ECONOMIC AND REVENUE
FORECAST. WE WANT TO THANK YOU
FOR THE OPPORTUNITY TO BE HERE
WITH US ON A QUARTERLY BASIS.
AS YOU SEE FROM THE MATERIALS
POSTED ON THE OFFICE OF ECONOMI
AND REVENUE FORECAST WEBSITE,
THEY PUT OUT ALL OF THE
MATERIALS . WE ALL RECEIVED
THOSE COLLECTIVELY AT THE SAME
TIME. MEMBERS OF THE BUDGET
OFFICE NOW HAVE THE OPPORTUNIT
TO WORK WITH US AS MEMBERS OF
THE FORECAST COUNCIL, THE CITY
COUNCIL, AND HE MAYOR'S OFFICE
TO CRAFT THE CHANGING REVENUE
STREAMS THAT ARE COMING TO THE
CITY TO ADDRESS ONGOING NEEDS.
HERE WE HAVE AN OPPORTUNITY TO
WALK THROUGH THE SECOND QUARTER
RETURNS. WE HAVE INFORMATION
THAT WE WILL LOOK AT FROM
QUARTER TWO, AS WELL AS
PROJECTIONS GOING FORWARD
THROUGH THE REMAINDER OF THE
YEAR AND THE UPCOMING NEAR-TERM
AS WELL. WE WILL DISCUSS THE NE
AUGUST REVENUE FORECAST BEING
PRESENTED HERE TODAY FROM
DIRECTOR NOBLE FROM THE OFFICE
OF ECONOMIC AND REVENUE
FORECAST, AND AS DIRECTOR NOBLE
HAS NOTED, WE HAVE ONE
SUBSTANTIVE MATTER ON THE
AGENDA. IT IS A VERY IMPORTANT
ITEM. THIS AUGUST REVENUE
FORECAST IS THE FORECAST THAT
WILL HELP PROVIDE THE BASIS FO
THE MAYORS UPCOMING 2024
PROPOSED BUDGET. THE CITY BUDGE
MUST BE BALANCED. THE SPENDING
FOR 2024 WILL BE DIRECTLY
CONSTRAINED BY THE FORECAST AN
THE REVENUE STREAMS THAT WE WIL
DISCUSS IN LARGE PART HERE
TODAY. IT WILL ALSO PROVIDE A
FULLER PICTURE FROM THE
ADDITIONAL REVENUE STREAMS THA
STILL ARE WITHIN THE OFFICE OF
THE CITY BUDGET. BOTH THE OFFIC
OF ECONOMIC BREVITY FORECAST AN
THE CITY BUDGET WILL BE IN FRON
OF CITY COUNCIL NEXT WEDNESDAY
IN THE FINANCE AND HOUSING
COMMITTEE MEETING TO PROVIDE A
SUMMARY OF THE DISCUSSION HERE
TODAY. OUR REVENUE FORECAST
COUNCIL MEETING RIGHT NOW IS TH
STARTING POINT TO DIGEST AND
RECEIVE THE PROPOSED REVENUE
FORECAST AND A CLEAR PICTURE O
HOW THE PROJECTED REVENUE HAS
COME IN TO DATE. AGAIN, WE ARE
RECEIVING THIS FROM THE
EXECUTIVES OFFICE THE LAST WEEK
OF SEPTEMBER. WE ARE SCHEDULED
TO ALSO YOU RECEIVE A REVENUE
FORECAST FOR THE OCTOBER MEETIN
ON TUESDAY, OCTOBER 17. THIS
IS A MEETING FOR 9:30 AM ON
OCTOBER 17. THIS WILL BE THE
FINAL FORECAST TO SET THE STAGE
FOR THEN , THE FINAL
DELIBERATIONS ON THE BUDGET.
BOTH OF THESE ARE IMPORTANT.
TODAY'S PRESENTATION WILL BE LE
FROM STAFF FROM THE INDEPENDEN
OFFICE OF ECONOMIC AND REVENUE
FORECAST. THE FORECAST OFFICE
WAS ESTABLISHED AT THE BEGINNIN
OF LAST YEAR. WE HAD THE FIRST
MEETING IN JANUARY 2022 . IT
INCLUDES THE MAYOR AND COUNCIL.
WE HAVE TWO REPRESENTATIVES FRO
EACH BRANCH. HE OBJECTIVE IS TO
PROVIDE UNBIASED BREVITY
FORECAST INFORMATION FREE FROM
ANY POTENTIAL POLITICAL PRESSUR
OR INFLUENCE IN REAL TIME TO
BOTH BRANCHES. GIVEN THAT THE
REVENUE FORECAST PLAYS SUCH A
CRITICAL ROLE IN DETERMINING TH
FINANCIAL CONSTRAINTS THAT
GOVERN THE OVERALL BUDGET, IT I
ESSENTIAL THAT WE PROTECT THIS
FORECAST PROCESS FROM ANY UNDUE
POLITICAL INFLUENCE AND KEEP IT
TRULY INDEPENDENT. BEFORE MOVIN
ONTO THE FORECAST PRESENTATION
FROM THE DIRECTOR, BEEN NOBLE,
AT THE OFFICE OF REVENUE
FORECAST, AND HIS TEAM, LET'S
BEGIN BY FORMALLY ADOPTING THE
AGENDA. A COPY HAS BEEN
CIRCULATED TO MEMBERS AND IS
POSTED IN A TIMELY MANNER ON TH
FORECAST COUNCIL WEBSITE
REGULARLY. WE PROVIDE THE
INFORMATION IN REAL TIME, ALONG
WITH THE MATERIALS . IT IS ALL
AVAILABLE TO MEMBERS OF THE
PUBLIC, THE PRESS, AND CITY
FAMILY. TODAY I WILL GO AHEAD
AND ADOPT THE AGENDA. I MOVED T
ADOPT THE AGENDA AS PRESENTED I
THE MATERIALS CIRCULATED AND
POSTED ON THE WEBSITE. IS THERE
A SECOND?
>> I SECOND.
>> THANK YOU VERY MUCH. TODAY'
AGENDA , THERE IS AN OPPORTUNIT
TO MOVE ANY ITEM OFF THE AGENDA
ANY PROPOSED AMENDMENTS? HEARIN
NONE. IF THERE IS NO OBJECTION,
THE AGENDA WILL BE ADOPTED --
ADOPTED. THE AGENDA IS ADOPTED
THAT MOVES US INTO ITEM NUMBER
ONE APPROVAL OF THE MINUTES FRO
THE APRIL 10, 2023 MEETING.
AGAIN, A COPY OF THE MEETING
MINUTES FROM THE APRIL 10
MEETING HAS BEEN CIRCULATED TO
MEMBERS OF THE REVENUE FORECAST
FOR 24 AND ALSO POSTED ONLINE O
THE WEBSITE. I WOULD SEEK A
SECOND FOR THE APPROVAL OF THE
MINUTES. I MOVE FOR ADOPTION O
THE MEETING MINUTES FROM APRIL
10, 2023. IS OUR SECOND?
>> SECOND.
>> THANK YOU VERY MUCH. IT HAS
BEEN MOVED AND SECONDED. ANY
ADDITIONAL COMMENTS OR EDITS?
HEARING NONE. IF THERE IS NO
OBJECTION, THE MEETING MINUTES
WILL BE APPROVED. THE MEETING
MINUTES FROM THE APRIL 10, 2023
REVENUE FORECAST COUNCIL ARE
ADOPTED AND APPROVED. LET'S GO
ON TO ITEM NUMBER TWO ON THE
AGENDA. THIS IS THE PRESENTATIO
OF THE AUGUST 2023 ECONOMIC AND
REVENUE FORECAST OFFICE AND
RECOMMENDATION FROM THE OFFICE
OF ECONOMIC AND REVENUE FORECAS
REGARDING THE 2023 AND 2024
REVENUE FORECAST. TODAY'S
PRESENTATION WILL BE LED FROM
STAFF FROM THE REVENUE FORECAST
OFFICE. THEY WILL PROVIDE A
SUMMARY OF BOTH THE ECONOMIC
CONDITIONS AND PROJECTED CITY
CITY REVENUES. TO ENSURE THE
COUNCIL IS FULLY INFORMED AND
ABLE TO HAVE A FULL RANGE OF
QUESTIONS TO BE ADDRESSED, STAF
FROM THE CITY COUNCIL CENTRAL
STAFF AND BUDGET OFFICE, CITY
BUDGET OFFICE, ARE ALSO HERE.
WELCOME TO PARTICIPATE IN THE
BRIEFING AND ASK QUESTIONS AS
WELL. THE PRESENTATION WILL
INCLUDE A FORMAL RECOMMENDATION
FROM THE FORECAST OFFICE
REGARDING THE FORECAST BEING
PRESENTED TODAY . AS A REMINDER
THE RULE OF THIS FORECAST
COUNCIL IS TO NEITHER CONFIRM
OR REJECT THE RECOMMENDATION.
AFTER THE PRESENTATION, WE WILL
HAVE THE OPPORTUNITY FOR
DISCUSSION OF THE FORECAST
BEFORE WE MAKE THE
DETERMINATION. I WANT TO THANK
YOU FOR BEING PART OF THIS
DISCUSSION HERE TODAY . I WANT
TO REITERATE OUR APPRECIATION
FOR THE INDEPENDENCE OF THE
FORECAST OFFICE. I WILL TURN IT
OVER TO DIRECTOR NOBLE TO WALK
US THROUGH THE PRESENTATION.
>> THANK YOU CHAIRMAN MOSQEDA.
WE HAVE A GOOD DEAL OF MATERIAL
TO COVER. I WILL DIVE RIGHT IN
AND SHARE MY SCREEN . ONE
MOMENT.
I WILL DIVE RIGHT IN. JUST TO
GIVE YOU A SENSE OF WHERE WE AR
HEADED TODAY, THE OUTLINE IS
FAMILIAR. WE HAVE USED THE SAME
STRUCTURE FOR THE LAST FEW
MEETINGS. I WILL PROVIDE A
HIGH-LEVEL SUMMARY OF WHAT WE
HAVE SEEN NATIONALLY AND LOCALL
ON THE ECONOMIC FRONT SINCE
APRIL . OBVIOUSLY, THOSE
DEVELOPMENTS ARE PART OF WHAT I
INFORMING THE FORECAST UPDATE.
WE WILL SHIFT TO THE SECOND PAR
OF THE PRESENTATION AND LOOK AT
THE ECONOMIC FORECAST. ON THE
TWO COMPONENTS, ONE IS THE
NATIONAL ECONOMY, I WILL
SUMMARIZE THE NATIONAL FORECAST
THAT UNDERLIES OUR WORK FROM
THE NATIONAL FORECASTING
SUBSCRIPTION TO S&P GLOBAL. AS
A REMINDER TO YOU ALL AND THE
PUBLIC, PAST MEETINGS WE HAVE
TALKED ABOUT THE IHS MARKET
FORECAST. THEY GOT BOUGHT OUT
BY S&P GLOBAL. WE ARE USING
THEIR PROPER NAME, BUT IT IS TH
SAME UNDERLYING FORECAST AGENCY
I WILL TURN THIS OVER TO MY
COLLEAGUE TO TALK ABOUT THE
REGIONAL FORECAST. WE USE THE
NATIONAL FORECAST AS AN INPUT T
THE REGIONAL MODELING, BUT IT
WILL BE IMPORTANT THAT THE
REGIONAL MODEL DOESN'T JUST
FOLLOW THE NATIONAL MODEL AND I
DESIGNED TO CAPTURE THINGS GOIN
ON IN THE LOCAL ECONOMY OR THAT
WE EXPECT TO GO ON THAT ARE
DIFFERENT. THE FINAL PORTION I
THE ACTUAL REVENUE FORECAST ,
BOTH FOR THE GENERAL FUND
REVENUE STREAMS , AND WE ALSO
TALK ABOUT THE NON-GENERAL FUND
REVENUES, INCLUDING A JUMPSTART
BY S&P GLOBAL AND REAL ESTATE
EXCISE TAX USED FOR GENERAL
PURPOSES. AND THEN SOME
TRANSPORTATION SPECIFIC REVENUE
SOURCES AS WELL. THAT IS THE
LAYOUT. I WILL DIVE IN. SINCE
ABOUT A YEAR AGO, WE HAVE BEEN
TALKING TO YOU ABOUT
EXPECTATIONS OF A SLOWDOWN.
EFFORTS, THAT WAS THE
EXPECTATION FOR A RECESSION.
YEAR AGO APRIL WE WERE EXPECTIN
A RECESSION THAT COULD HIT LAY
IN 2020 -- 2022 INTO EARLY
2023. THAT GOT PUSHED OUT OVER
TIME AS A NATIONAL ECONOMY SEE
TO BE STRONGER THAN HAD BEEN
ANTICIPATED. IN APRIL LAST, WE
STARTED TALKING ABOUT THE IDEA
OF A SOFT LANDING. EVER MORE,
THAT WILL BE A THEME IN THIS
FORECAST. THAT IS EVERMORE THE
EXPECTATION. RATHER THAN BRACIN
OURSELVES FOR A POTENTIAL
RECESSION, ALTHOUGH EXPECTATION
HAD BEEN FOR A SHORT ONE , A
MILD ONE EXPECTATION FORECAST
ARE NOW THAT WE WILL ACTUALLY
COOL THE ECONOMY OFF WITHOUT
GOING INTO A PERIOD OF NEGATIVE
GROWTH, WHICH IS THE DEFINITION
OF A RECESSION. THAT IS WHAT WE
EXPECT. THE DATA THAT WE HAVE
SEEN SINCE APRIL AND THE
DEVELOPMENTS SINCE APRIL AT A
NATIONAL LEVEL REINFORCED THAT
NOTION. THAT IS WHAT IS SHOWN
HERE. WANT TO HIGHLIGHT SOME OF
THESE. THE FIRST CHART ON THE
RIGHT FOCUSES ON THE LABOR
MARKET. THE BARS SHOW JOB
CREATION. NUMBERS OF JOBS
CREATED PER MONTH. WHAT YOU CAN
SEE THERE, SINCE APRIL, THE
ECONOMY HAS CONTINUED TO PRODUC
ROUGHLY 200,000 JOBS PER MONTH
ON AVERAGE, A LITTLE BIT MORE.
AT THE SAME TIME, IT IS NOT HAR
TO SEE A TREND DOWNWARD IN
THOSE ORANGE BARS. THE RATE OF
JOB CREATION HAS BEEN COOLING
OVER THAT TIME. GIVEN WHERE
INFLATION HAS BEEN IN THE GOAL
OF BRINGING IT UNDER CONTROL,
THAT IS ACTUALLY GOOD OUTCOME,
ARGUABLY. YOU CAN SEE THE LINE
IS THE UNEMPLOYMENT RATE. IT HA
BEEN RELATIVELY STABLE. WE HAVE
BEEN CREATING JOBS, KEEPING
UNEMPLOYMENT STABLE. THAT
IMPLIES WE ARE ESSENTIALLY
CREATING AS MANY FOLKS ENTERIN
THE WORKFORCE AS THERE ARE NEW
JOBS. WE WILL TALK MORE ABOUT
THE WORKFORCE AS WELL. IF THERE
IS A CONCERN THAT IS STILL
THERE IN TERMS OF THE LABOR
MARKET, IT IS ON WAGE GROWTH.
THINGS HAVE STABILIZED, BUT
STABILIZING THE SITUATION WHERE
THE LABOR MARKET REMAINS TIGHT.
THERE STILL MORE JOB OPENINGS
AND THERE ARE LOOKING FOR A JOB
AT ANY GIVEN TIME. THE RESULT
HAS BEEN A POSITIVE PRESSURE ON
WAGES . IN GENERAL, ONE MIGHT
THINK THAT IS A GOOD THING, BUT
IT ALSO CREATES POSITIVE
PRESSURE ON INFLATION. THE FED
HAS BEEN ANXIOUS TO BRING
INFLATION UNDER CONTROL. THE
PERSISTENT WAGE GROWTH, IF THER
IS A CONCERNING FACTOR, THAT
MIGHT BE IT. SHIFTING TO TALK
MORE ABOUT INFLATION, THE CHART
ON THE BOTTOM SHOWS PATTERNS OF
INFLATION AND THE WORK OF THE
FED TO CONTROL INFLATION. WHAT
YOU CAN SEE IS THAT HAVING
PEAKED AS HIGH AS 9% -- THE
GREENLINE IS CONSUMER PRICE
INDEX FOR URBAN AREAS. IT IS A
GENERAL MEASURE OF INFLATION
YOU HEAR TALKED ABOUT AND
WRITTEN ABOUT IN THE PRESS.
HAVING PEAKED AT 9% A YEAR AGO
JUNE, IT HAS COME DOWN MOST
RECENTLY TO 3% IN JUNE, DATA
TODAY CAME OUT FOR JULY, IT
TAKES UP TO 3.2%, BUT STILL,
OBVIOUSLY, MUCH REDUCED FROM
LAST YEAR . THE REDUCTION OVER
THE PAST FEW MONTHS HAS ACTUALL
OUTPACED EXPECTATION. INFLATION
HAS COOLED OFF FASTER SINCE
APRIL THAN MOST FOLKS EXPECTED
I DO WANT TO NOTE IT IS SHOWN
HERE AS WELL THAT CORE
INFLATION, WHICH IS IMPORTANT
FOR A VARIETY OF REASONS, ONE O
WHICH THE FED IS FOCUSED ON
MEASURING THE COURT INFLATION O
THE PCE TO MEASURE CHANGES IN
PRICES, EXCLUDING ENERGY AND
FOOD, WHICH TEND TO BE VERY
VOLATILE. IT IS NOT EXCLUDED
BECAUSE PEOPLE DON'T HAVE TO
SPEND MONEY ON THOSE THINGS, BU
RATHER, OVERTIME, THE CORE CPI
IS SEEN AS A BETTER MEASURE OF
THE LONG-TERM TREND IN PRICES.
WHAT YOU SEE IS THAT THE CORE
CPI HAS COME DOWN. IT WAS ABOVE
ABOUT 6% A YEAR AGO, DOWN TO
4.6% IN JUNE. THE DATA FOR TODA
INDICATE THAT THE FOLLOWING TO
4.4%. IT HAS CONTINUED TO FALL
EVEN AS THE CPI, THE BROADER
MEASURE, HAS GONE UP. CORE
INFLATION IS COMING DOWN, BUT
NOT AS QUICKLY. GOOD NEWS THER
IS THAT WE EXPECT COOLING
RENTAL MARKETS WILL BRING COURT
INFLATION DOWN GOING FORWARD. W
WILL TALK MORE ABOUT THAT
REGIONALLY AS WELL. THE CPA --
THE CPI MEASURES USE CPI FOR
HOUSING COST. IT TAKES A WHILE
FOR A COOLING RENTAL MARKET TO
PERCOLATE INTO THE CPI. THERE I
REASON TO THINK THIS, BECAUSE
RENTAL MARKETS HAPPEN COOLING.
THAT SHOULD HELP BRING DOWN BOT
OVERALL CPI AND CORE CPI GOING
FORWARD. I JUST EXPLAINED THE
ECONOMY HAS BEEN DOING BETTER
THAN WE THOUGHT. AS YOU SEE, W
WILL STILL PREDEATH THAT PROJEC
A SLOWDOWN. ONE MIGHT FAIRLY
ASK, WHY ARE WE STILL PROJECTIN
THAT AND ALSO WONDER WHY WE HAV
BEEN -- IF WE HAVE BEEN
INSPECTING THIS FOR A YEAR, WHY
HASN'T IT HAPPENED? ONE REASON
, THE MAJOR REASON THE SLOWDOWN
FORECAST IS STILL THERE, IS
BECAUSE THE FED IS IT COMMITTE
TO COOLING THE ECONOMY.
INFLATION IS STILL RUNNING ABOV
THE TARGET LEVEL OF 2% TO 2.5%.
IT HAS MADE IT VERY CLEAR IT
WILL CONTINUE TO INCREASE
INTEREST RATES SUCH THAT IT CA
COOL THE ECONOMY AND BRING
INFLATION DOWN. BEFORE WE TALK
MORE ABOUT THAT, I WANT TO TAKE
A MOMENT TO ASK PLANE A LITTLE
BIT ABOUT HOW IT IS THAT THE FE
ACTUALLY AFFECTS THE OVERALL
ECONOMY WITH THE WORK ON
INTEREST RATES. IT CAN UNDER -
IT CAN HELP YOU UNDERSTAND WHY
IT IS TAKING SO LONG TO BE SEEN
IN ACTUAL DATA. THE BASIC IDEA
IS THAT THE FED HAS LIMITED
TOOLS. RAISING INTEREST RATES
ONLY AFFECT SOME PARTS OF THE
ECONOMY . IN PARTICULAR, IT
AFFECTS THOSE THAT RELY ON
BORROWED MONEY. IF YOU'RE IN
THE CONSTRUCTION INDUSTRY, MOS
CONSTRUCTION GOES ON WITH
DOLLARS THAT HAVE BEEN BORROWED
FROM A BANK. YOU BUILD A
BUILDING AND START GENERATING
REVENUE TO PAY OFF THE LOAN. I
YOU'RE BUYING A RESIDENTIAL
PROPERTY, MOST PEOPLE ARE TAKIN
ON A SIGNIFICANT MORTGAGE TO DO
THAT. A LOT OF PEOPLE BORROW
MONEY FOR AUTOMOBILES. ALL OF
THOSE THINGS BECOME MORE
EXPENSIVE AS INTEREST RATES GO
UP. THOSE ACTIVITIES SLOWDOWN.
AS THOSE SECTORS SLOWDOWN, THEY
WILL REDUCE EMPLOYMENT OR WAGES
TO THE PEOPLE WHO WORK IN THOS
SECTORS. THOSE FOLKS WILL TAKE
HOME LESS MONEY AND THAT RIPPLE
THROUGH THE ECONOMY AND
DECREASES DEMAND IN OTHER
SECTORS AS WELL, COOLING THOSE
MARKETS AND BRINGING DOWN PRICE
OVERALL. IT IS TRUE THAT
MECHANISM THE FED IS HOPING TO
COOL THE ECONOMY. THEY REMAIN
COMMITTED TO DOING THAT. IN
JUNE THEY PAUSED INTEREST RATES
, BOTH BECAUSE THEY SON PATIENT
WAS COMING DOWN BECAUSE OF SOME
INSTABILITY IN THE FINANCIAL
SECTOR, NOTABLY, THE SILICON
VALLEY BANK GOING BANKRUPT.
THEY TOOK A PAUSE IN JUNE, BUT
THEY RAISED RATES AGAIN IN JULY
AND THERE IS GROWING EXPECTATIO
THAT THEY WILL RAISE RATES
AGAIN. THE EFFECT OF THAT WILL
BE TO BRING DOWN THE GROWTH RAT
OF THE OVERALL ECONOMY. THE MOS
RECENT FORECAST PUBLISHED THIS
WEEK, THEY ARE INSPECTING
GROWTH OF 2% THIS YEAR , AND
THEN IT WILL SLOW SOME FOR 202
AND THEN CONTINUE AT A LOWER
RATE THE ON THAT. I SEE THERE
IS A QUESTION . HAPPY TO TAKE
THAT, IF YOU WOULD LIKE.
>> PLEASE GO AHEAD.
>> DID THE FEDS MAKE A DECISIO
ABOUT INTEREST RATES BASED ON
ENERGY PRICES?
>> THEY ARE FOCUS HAS BEEN MORE
ON THE CORE PCE MORE ON
SOMETHING ELSE THEY USE, THE
CORE CPI. THOSE ARE MEASURES
THAT ABSTRACT AWAY FROM THE
VOLATILITY IN FUEL PRICES. THEY
ARE TRYING TO LOOK PAST THAT
INTO LONGER-TERM TRENDS. THAT
SAID, FUEL PRICES, IF THEY CAN
PRINT -- IF THEY PERSIST, THEY
CAN AFFECT THE ENTIRE ECONOMY.
THEY ARE NOT IGNORING THAT, BUT
THERE'S A LOT MORE NOISE IN FUE
PRICES THAN THERE IS OVERALL.
>> THANK YOU.
>> WE HAVE FORECASTING A
SLOWDOWN FOR SOME TIME. WHITE
IS IT TAKING SO LONG FOR ACTION
FROM THE FED TO TAKE EFFECT?
THERE ARE FORCES THAT HAVE BEEN
PUSHING THE ECONOMY THE OTHER
WAY THE SAME TIME THE FED HAS
BEEN TRYING TO COOL IT. ONE OF
THOSE IS THAT ENERGY PRICES ARE
TAKING UP AGAIN. THEY HAD BEEN
COMING DOWN THE EARLY PART OF
THE YEAR. THAT EFFECTIVELY ACTE
AS A STIMULUS TO THE ECONOMY.
FOLKS WERE SPENDING LESS MONEY
ON GAS AND HAD MORE
DISCRETIONARY MONEY TO SPEND ON
OTHER THINGS. ANOTHER IS THAT
AS RECENTLY AS EARLY 2021 THE
FEDERAL GOVERNMENT WAS IN A
STIMULUS MODE, TRY TO ENSURE WE
HAD A ROBUST RECOVERY FROM THE
PANDEMIC. WE WERE ENGAGED IN
PROVIDING ADDITIONAL RESOURCES
TO THE PUBLIC OVERALL. THE FED
IS NOW TRYING TO DO THE
OPPOSITE. THERE IS STILL SOME
ECHO FROM THAT STIMULUS ,
INDIVIDUAL HOUSEHOLD BALANCE
SHEETS HAVE EXTRA RESOURCE.
PEOPLE ARE STILL SPENDING SOME
OF THAT STIMULUS. ANOTHER ISSUE
THAT IS PLAYED OUT , SOMEWHAT
UNUSUALLY, IS THAT THE
AUTOMOBILE MARKET NORMALLY
RAISING INTEREST RATES WILL COO
THE AUTOMOBILE MARKET , BECAUSE
PEOPLE BORROW MONEY TO BUY CARS
BUT BECAUSE OF SUPPLY CHAIN
ISSUES, THE ENTIRE MARKET HAVE
BEEN SEIZED UP FOR MUCH OF 2021
AS THOSE ISSUES HAVE BEEN
RESOLVED, THERE IS PENT-UP
DEMAND. THE AUTOMOBILE SECTOR
HAS BEEN DOING QUITE WELL
DESPITE INTEREST RATES, HIGHER
INTEREST RATES. THAT IS A BIG
PART OF THE OVERALL ECONOMY. IT
HAS MADE A DIFFERENCE. THE LABO
MARKET HAS REMAINED TIGHT. A LO
OF FOCUS LEFT THE WORKFORCE
DURING THE PANDEMIC. THEY HAVE
BEEN SOMEWHAT SLOW TO RETURN.
MOST RECENT DATA INDICATES THAT
MORE FOLKS ARE COMING BACK TO
WORK. I DON'T MEAN BACK TO THE
OFFICE , BUT I MEAN ACTUALLY
REENTERING THE WORKFORCE BUT
THERE'S ALSO EVIDENCE THAT
IMMIGRATION IS HELPING TO
INCREASE THE OVERALL WORKFORCE.
TO GIVE YOU SOME CONTEXT FOR
MY, EVEN WITH GOOD RESULTS
OVERALL FOR THE ECONOMY, WE'RE
STILL PROJECTING A SLOWDOWN
COMING UP. WE WILL TALK MORE
ABOUT WHY WE ARE PROJECTING
SOMETHING EVEN A LITTLE BIT
DIFFERENT FOR THE LOCAL ECONOMY
LET ME TALK ABOUT WHAT WE HAVE
SEEN IN LOCAL ECONOMIES IN THE
PAST FEW MONTHS.
>> ANOTHER QUESTION. ON THE
PREVIOUS SLIDE, THIS MORNING O
NPR THEY KEEP COMING BACK TO
THE SAME QUESTION. THE WORD
EVERYBODY KEEPS TALKING ABOUT I
RECESSION, AND IT NEVER ACTUALL
CAME. BUT THINGS STILL LOOK
GLOOMY FOR THE FUTURE. THEY
NOTED THAT THE INTEREST RATES
HAVE CONTINUED TO FALL OVER THE
LAST YEAR, BUT THEY ADDED NOW
0.2% INTEREST RATE MAYBE THIS
MORNING. MAYBE I HAVE THE WRONG
NUMBERS. CAN YOU COMMENT ON IF
THERE WAS ANYTHING THAT WAS
ANNOUNCED TODAY AND ANY NEW
INFORMATION THAT AFFECTS THIS
TREND YOU HAVE SEEN OVER THE
LAST YEAR ON INTEREST RATES?
>> THE NEWS THIS MORNING WAS
ABOUT INFLATION. IN JULY, --
>> INFLATION. SORRY. ON INTERES
RATES. GOT IT.
>> BUT HIGHLY RELATED. THE FED
DUDE DID CHOOSE TO INCREASE THE
BENCHMARK RATE IN JULY. THEY
RESUME THE INCREASE IN JULY ,
BECAUSE ALTHOUGH INFLATION WAS
COMING DOWN, THEY WERE STILL
SEEING CORE INFLATION
PERSISTING. PRESUMABLY, THEY
THOUGHT THE FINANCIAL MARKETS
HAVE STABILIZED ENOUGH THAT THE
COULD INCREASE INTEREST RATES
WITHOUT FURTHER RISK OF BANK
FAILURES, TO BE DIRECT. THE NEW
TODAY ON INFLATION WAS IN SOME
WAYS MIXED, BUT OVERALL,
PROBABLY ACTION FIRM -- FROM TH
FED WAS GOOD NEWS. THE BROADES
MEASURE OF INFLATION DID TAKE
UP. SO HAVING BEEN AT 3%
YEAR-OVER-YEAR , THE 12 MONTHS
PRECEDING THE ENDED IN JUNE,
FOR JULY IT TICKED UP TO 3.TO.
BUT AT THE SAME TIME, THE CORE
RATE, TAKING OUT FOOD AND FUEL,
CONTINUED TO DECLINE. THAT
LONGER-TERM TREND THAT THE FED
IS FOCUSED ON WAS STILL HEADED
IN THE RIGHT DIRECTION. THAT
SAID, THE GROWING EXCITATION I
THAT THE FED WILL INCREASE RATE
POTENTIALLY ONE MORE TIME BEFOR
THE END OF THE YEAR, AND THEN
WAIT SOMETIME WELL INTO NEXT
YEAR TO SEE IF PRICES ARE WELL
UNDER CONTROL BEFORE THEY START
LOWERING INTEREST RATES. THEY
WILL DO THAT SLOWLY . AND SO,
THE FOCUS HAS SHIFTED FROM THE
EXPECTATION THAT WE WOULD HAVE
A BRIEF AND MILD RECESSION TO
ACTUALLY BEING ABLE TO COOL THE
ECONOMY WITHOUT INDUCING AN
ACTUAL SLOWDOWN. YOU WILL SEE
MORE OF THIS GOING FORWARD IN
THE PRESENTATION. JUST A
COMMENT MORE ABOUT THE LOCAL
ECONOMY AND TO EMPHASIZE SOME O
THE RISKS WE SEE. AT A HIGH
LEVEL, THE LOCAL ECONOMY IS
BEHAVING A LOT LIKE THE NATIONA
ECONOMY. ON THE LEFT YOU CAN SE
A COMPARISON BETWEEN INFLATION
IN THE SEATTLE AREA AND THE U.S
THE INFLATION RATE LOCALLY HAS
BEEN RYAN -- RUNNING HIGHER THA
THE NATIONAL LEVEL, PARTICULARL
DRIVEN BY HOUSING PRICES. YOU
CAN SEE TO THE RIGHT OF THE
GRAPH THE PRICES HAVE NOW BEEN
FALLING AND ARE STARTING TO
CONVERGE TOWARDS THE NATIONAL
LEVEL OF INFLATION. AGAIN,
EXPECTATION IS THAT AS THE CPI
IS UPDATED FOR THE NEWER RENTAL
RATES , THAT NUMBER WILL
CONTINUE TO COME DOWN. ON THE
EMPLOYMENT SIDE, IN THE PERIOD
IMMEDIATELY FOLLOWING THE
PANDEMIC, 2021 UNEMPLOYMENT IN
THE CITY WAS LOWER THAN THE
NATION AS A WHOLE. WE HAD A
PRETTY ROBUST RECOVERY
IMMEDIATELY FOLLOWING. WERE
RECENTLY, UNEMPLOYMENT IN THE
AREA HAS BEEN ESSENTIALLY EQUAL
TO THE NATIONAL LEVEL. OVERALL,
WE HAVE BEEN DOING REASONABLY
WELL. WHEN WE DIG IN FURTHER, W
DO SEE THAT THERE ARE RISKS AND
POTENTIAL DIFFERENCES IN THE
LOCAL ECONOMY RELATIVE TO THE
NATIONAL ECONOMY. THIS IS A
GRAPH WE HAVE SHOWN YOU ON A
REGULAR BASIS. IT SHOWS THAT
EMPLOYMENT CHANGED, THIS
PARTICULAR ONE SHOWS APPOINTMEN
CHANGE SINCE THE BEGINNING OF
THE YEAR. THE TOP LINE IN THE
BLACK IS A TOTAL NUMBER OF JOBS
CREATED SINCE THE BEGINNING OF
THE YEAR IN THE SEATTLE AREA,
JUST UNDER 25,000. THE BARS
BELOW BREAKOUT THE SECTORS. WHA
IS OF NOTE HERE IS THAT WE ARE
GETTING JOB GROWTH IN A LOT OF
SECTORS, BUT THE ONES WE ARE NO
ARE OF PARTICULAR INTEREST. WE
LOST ALMOST 5000 JOBS IN THE
INFORMATION SECTOR , WHICH IS
CONSISTENT WITH THE LAYOFFS AND
TECHNOLOGY. THE PROFESSIONAL
AND BUSINESS SERVICES SECTOR ,
WHICH IS THE THIRD OF THE BLUE
BARS, IT IS BARELY ADDING JOBS
SINCE THE BEGINNING OF THE YEAR
JUST 200. AT THE HEIGHT OF
HIRING IN THE 2021 PERIOD, THAT
WAS ONE OF THE PLACES WHERE WE
SAW A LOT OF TECH JOBS. FIRMS
ALLOCATED INTO ONE OF THESE TWO
BUCKETS. THE FACT THAT THERE IS
ALMOST NO GROWTH THERE IS
ACTUALLY A SIGN OF THE SLOWDOWN
THE OTHER PLACE WHERE WE'RE
SEEING A LOSS IS IN HOUSING AN
CONSTRUCTION. AS THE TECHNOLOG
SECTOR HAS SLOWED, DEMAND FOR
OFFICE SPACE HAS SLOWED, ALSO
WORK FROM HOME IS SLOWING DEMAN
FOR OFFICE. ALSO, JUST A
SLOWDOWN IN GENERAL IN THE RATE
OF HIRING. DEMAND FOR
RESIDENTIAL CONSTRUCTION IS
COOLING AS WELL. THOSE WILL
HAVE RIPPLE EFFECTS GOING
FORWARD. WE WILL SEE MORE THAT
ON THE NEXT SLIDE AND ALSO LATE
IN THE PRESENTATION. I DO WANT
TO NOTE THAT LEISURE AND
HOSPITALITY HAVE NOW BECOME THE
LEADING AREA IN TERMS OF NEW
JOBS . DESPITE THAT VERY
SIGNIFICANT ADDITION OF ALMOST
10,000 JOBS, THE SECTOR , IN
TERMS OF HEADCOUNT, NOT QUITE
BACK TO WHERE IT WAS
PRE-PANDEMIC. THERE IS STILL
OPPORTUNITY FOR GROWTH THEY ARE
WHAT WE'RE SEEING IN TERMS OF
CRUISE SHIPS AND TOURISM IS A
DRIVING FORCE GOING FORWARD
POTENTIALLY AS WELL. THE CHANGE
IN THE TECH SECTOR AND
CONSTRUCTION ARE A CONCERN. IT
IS A CONCERN WE ARE SEEING
EVIDENCE OF SPREADING TO OTHER
PARTS OF THE ECONOMY,
POTENTIALLY. IN PARTICULAR, ON
THE LEFT IS A COMPARISON OF WAG
GROWTH . WE ALREADY TALKED ABOU
THE FACT THAT AT THE NATIONAL
LEVEL WAGE GROWTH HAS BEEN
AROUND 4.5% FOR THE LAST LITTLE
WHILE. THAT IS SHOWN HERE. THE
REDLINE IS FOR THE SEATTLE AREA
IN 2021 AS TECH FIRMS WERE
HIRING UP, WE HAD VERY STRONG
WAGE GROWTH OUTPACING THE
NATION. IN 2022, AS THERE WAS A
SLOWDOWN IN HIRING AND STOCK
VALUES IN THE TECHNOLOGY SECTOR
STARTED TO FALL, WE FELL BELOW
THE NATIONAL WAGE GROWTH WE
ACTUALLY WENT NEGATIVE. THERE
WAS A PIECE IN THE SEATTLE TIME
A COUPLE WEEKS AGO POINTING OUT
THAT FOR THE FIRST TIME IN A
LONG TIME, COUNTY LEVEL INCOMES
HAVE DROPPED IN 2022. AS A
TECHNOLOGY SECTOR COOLS AND THE
HIGH WAGE JOBS ARE PAYING LESS
OR THERE ARE FEWER OF THEM, THA
AFFECTS THE ECONOMY OF THE
REGION OVERALL. THERE IS LESS
MONEY BEING SPENT ON A VARIETY
OF SERVICES AND GOODS BEYOND TH
IMMEDIATE SECTOR. AS I
MENTIONED, WE ALSO THINK THAT
COOLING WILL AFFECT CONSTRUCTIO
. IT IS A LITTLE HARD TO TELL
WHERE WE ARE IN TERMS OF A
TREND, BUT THE GRAPH ON THE
RIGHT HIGHLIGHT THE VALUE OF
ISSUE BUILDING PERMITS. IT
APPEARS 2023 IN THE GREEN TO
2022 IN THE BLUE ON A MONTHLY
BASIS. THESE ARE DATA FROM
DEPARTMENT OF CONSTRUCTION AND
INSPECTIONS. IT IS NOT TRUE FOR
EVERY MONTH, BUT FOR SEVERAL
MONTHS , THE FIGURES FOR 2023
ARE NOTABLY BELOW 2022. IN
AGGREGATE COMING HERE TODAY,
THROUGH JULY, THE VALUE OF
ISSUED PERMITS IS DOWN ABOUT
20%. MAYBE MORE IMPORTANTLY, IF
YOU LOOK AT THE BIGGER PROJECTS
OF $1 MILLION OR MORE, IT
DOESN'T BUY YOU MUCH THESE DAYS
SO ANYTHING OF SIGNIFICANCE IS
$1 MILLION OR MORE. THERE THE
PROJECTS ARE DOWN BY 35%. WE
ARE SEEING LESS PERMITTING IN
TERMS OF ISSUED PERMITS, WHICH
WILL UNDOUBTEDLY LEAD TO LESS
ACTUAL CONSTRUCTION ACTIVITY
GOING FORWARD. THESE ARE
ABSTRACT CONCERNS WE ARE
ABSOLUTELY SEEING IN THE DATA.
>> THIS IS HELPFUL. PART OF TH
CONVERSATION WE HAVE BEEN HAVIN
THE LAST FEW MONTHS WAS RELATE
TO SPURRING ECONOMIC ACTIVITY .
IT IS SOMETHING I BROUGHT UP
HERE IN THE FORECAST COUNSEL AS
WELL. AS A TOOL FOR ECONOMIC
ACTIVITY, WE SHOULD BE LOOKING
AT WAYS TO EXPEDITE PERMITTING.
GUESS ONE OF THE QUESTIONS I
HAVE ON THIS CHART HERE IS, IS
THIS TOTAL APPLICATION
SUBMITTED, OR IS THIS
APPLICATIONS APPROVED?
>> THIS IS ISSUED PERMITS.
>> MAYBE THIS IS OUTSIDE THE
PURVIEW OF THE FORECAST OFFICE,
BUT IF WE CAN PREPARE THIS TO
TOTAL PERMITS SUBMITTED TO SEE
IF THERE WAS A BACKLOG AND
WHETHER OR NOT THE SAME NUMBER
OF PERMITS WERE BEING REQUESTED
THIS YEAR COMPARED TO LAST
YEAR, FOR EXAMPLE, AND IF IT IS
JUST A MATTER BACKLOG OR A
MATTER OF PERMITS BEING DOWN IN
THAT ALSO BEING AN INDICATION O
WHERE THE ECONOMY IS HEADED IN
TERMS OF INTEREST IN DEVELOPING
IN THIS AREA.
>> I CAN GIVE YOU A SENSE OF
HOW IT IS HARD TO INTERPRET THE
DATA. THE VALUE OF SUBMITTED
PERMITS HAS ACTIVELY BEEN
RELATIVELY CONSTANT THIS YEAR .
MAY BE UP A LITTLE BIT. IT IS
DIFFICULT TO TELL WHETHER THAT
WILL REPRESENT A BACKLOG. AT TH
END OF THE DAY, IT IS A
DECISION TO PULL THE PERMIT, IT
IS AND ISSUED TO YOU. WE HAVE
THE MONEY LINED UP TEXT REBUILD
THE PROJECT. TO THE EXTENT THAT
HIGHER INTEREST RATES ARE
SLOWING FOLKS DOWN AND
DISCOURAGING, THE BOTTOM LINE
IS, IT CAN BE THAT PEOPLE SUBMI
PERMITS THAT THEY WILL NEVER
PULL. IT IS A FORWARD-LOOKING
MEASURE, BUT IS NOT A TIGHT
CORRELATION WITH THE ACTUAL
CONSTRUCTION ACTIVITY AS IS
ISSUED PERMITS. THAT IS WHY TH
TREND IS HARD TO DISCERN . WE
ARE SEEING THE PERMIT DATA THA
SUGGESTS A COOLING, AND ALSO WE
KNOW THAT OFFICE DEMAND IS
SLOWING BECAUSE OF WORK FROM
HOME AND OVERALL HIRING TRENDS.
IT IS CONFIRMATION OF THAT
GENERAL OBSERVATION. IT IS A
SCENARIO WE CONTINUE TO MONITOR
WE GET MONTHLY UPDATES AND
PRACTICE ON A REGULAR BASIS.
THERE IS SOME LEVEL OF
DISCONNECT BETWEEN PERMIT
APPLICATIONS AND PERMITS ISSUED
OR AT LEAST THERE CAN BE. WITH
THAT, WE WILL SHIFT AND START
TALKING ABOUT THE FORECAST. WE
HAVE BEEN LOOKING AT WHAT HAS
BEEN HAPPENING THE LAST FEW
MONTHS , AND NOW I WANT TO LOOK
FORWARD TO WHAT WE EXPECT TO BE
HAPPENING. I WILL FIRST TALK
ABOUT THE NATIONAL FORECAST, AN
THEN I WILL TURN THIS OVER TO
TALK ABOUT THE REGIONAL
FORECAST. AT A NATIONAL LEVEL,
I WANTED TO HIGHLIGHT HOW THE
FORECAST HAS BEEN CHANGING OVER
TIME. I WANT TO REEMPHASIZE TH
NOTION OF A SOFT LANDING. THES
ARE FORECASTS FOR EMPLOYMENT
GROWTH. THE ARROWS INDICATE TH
CHANGE OVER TIME. BACK IN
NOVEMBER, WE SHOWED YOU THE
FORECAST. THE EXPECTATION WAS
FOR A RECESSION. JOB GROWTH WA
GOING TO FALL NEGATIVE IN 2024,
BELOW THE ZERO LINE, IF YOU
WILL, AND THAT WOULDN'T STAY
THERE FOR LONG. IT WAS GOING TO
BE A SHALLOW RECESSION, BUT THA
WAS THE EXPECTATION. AS OF
APRIL, IS SHIFTED TO AN
EXPECTATION OF A SOFT LANDING.
THIS IS THE SAME TITLE WE HAD I
APRIL. IN APRIL IT WAS NEWS
THAT IT WAS NOW A SOFT LANDING.
AT THIS POINT, IT IS STILL A
SOFT LANDING. ACTUALLY A LITTLE
BIT SOFTER. THE NATIONAL
ECONOMY HAS PROVEN MORE
RESILIENT. AS IMPORTANTLY,
INFLATION IS COMING DOWN WITHOU
HAVING SIGNIFICANT SLOWDOWN IN
EMPLOYMENT AND THE LIKE. WE'RE
GETTING EXACTLY THE OUTCOME THA
ONE WOULD HOPE. INFLATION
COMING DOWN WITHOUT SIGNIFICANT
LOSS IN JOBS OR SIGNIFICANT
SLOWDOWN IN OVERALL OUTPUT. TH
FORECAST HAS BEEN UPDATED TO
REFLECT THE REALIZED STRENGTH
AND GIVEN INCREASED PROBABILITY
OF A SOFT LANDING STYLE
SLOWDOWN. THE EXPECTATION IS
THAT THE FED NOW WILL BE ABLE T
MANAGE INTEREST RATES . TO BRIN
DOWN INFLATION, BUT DO THAT BY
SLOWING THE GROWTH OF
EMPLOYMENT, BUT NOT ACTUALLY
LEADING US INTO A RECESSION. A
THE NATIONAL LEVEL, THE FORECAS
IS POSITIVE IN THAT SENSE. ON
THE INFLATION SIDE, THE FORECAS
IS LARGELY UNCHANGED. MAINLY
WHAT IT IS DOING IS
ACKNOWLEDGING THE FACT THAT
INFLATION HAS ACTUALLY COME DOW
FASTER THAN ORIGINALLY EXPECTED
THE APRIL FORECAST IS THE
ORANGE LINE. IT IS HARD TO SEE,
BUT IT WAS RUNNING A LITTLE
AHEAD -- THE DARKER LINE IS TH
AUGUST FORECAST, AND IT SHOWS
THE EXPECTATION IS THAT
INFLATION WILL BE A LITTLE BIT
LOWER THROUGH THE REST OF 2023
AND MUCH OF 2024. BUT THEN,
HEADING ALL IN THE SAME
DIRECTION TO THIS TARGET RATE O
2.5 PERCENT. THE FED IS REALLY
FOCUSED ON THIS CORE INFLATION
AND PCE , BUT AGAIN, THEY ARE
SEEING GOOD NEWS THERE. IS STIL
RUNNING HIGHER THAN THEY WOULD
LIKE, SO THAT WOULD KEEP
INTEREST RATES UP, BUT THE
OVERALL EXPECTATION IS THAT
INFLATION WILL CONTINUE TO
MODERATE , EMPLOYMENT GROWTH
WILL CONTINUE, BUT AT A SLOWER
RATE. EXACTLY THE SOFT LANDING
THAT HAD BEEN DESIRED. SHIFTIN
GEARS FOR A MOMENT. I WANT TO
TALK A LITTLE BIT ABOUT THE
NATIONAL LEVEL ABOUT THE
DIFFERENCE BETWEEN THE BASELINE
AND PESSIMISTIC FORECAST. ONE O
THE DECISION POINT IS WHICH OF
THESE TO USE AS AN INPUT TO THE
OVERALL FORECAST WORK. THE
PESSIMISTIC FORECAST THAT S&P
HAS DEVELOPED AT THE NATIONAL
LEVEL IS ONE THAT IS REALLY
TIED TO GLOBAL EVENTS. THE
SCENARIO THEY PLAY OUT THERE IS
ONE WHERE THE RUSSIAN WAR ON
UKRAINE ESCALATES FROM WHERE I
IS NOW . IN PARTICULAR, THAT
WOULD LEAD TO FURTHER
DISRUPTIONS IN COMMODITIES, FOO
, GRAIN, AND ALSO ENERGY. THAT
WOULD START TO DRIVE UP PRICES.
YOU SEE ON THE RIGHT THE
INFLATION FORECAST IN THE
PESSIMISTIC SCENARIO IS HIGHER
INFLATION. WITH HIGHER
INFLATION, THE FED WOULD RESPON
WITH HIGHER INTEREST RATES. THA
COULD THEN CREATE SOME
INSTABILITY IN THE BANKING
SECTOR THAT WOULD THEN LEAD TO
A SLOWDOWN OVERALL AND COOL TH
ECONOMY. IN THAT CASE, IT IS
NOT QUITE A RECESSION IN THE
SENSE THAT WE DON'T SEE NEGATIV
EMPLOYMENT GROWTH IN THIS
PARTICULAR PHASE, BUT THE LOWE
GRAPH SHOWS A MUCH LOWER RATE O
GROWTH IN EMPLOYMENT. I WANT T
EMPHASIZE -- AND THIS IS A 25%
PROBABILITY. SINCE THEY
DEVELOPED THIS FORECAST, THE
SITUATION IN UKRAINE HAS GOTTEN
LESS STABLE . BUT THIS IS REALL
A FORECAST THAT HAS TO DO WITH
GLOBAL SCALE. IT DOESN'T REALL
CAPTURE THE RISKS WE SEE AT THE
REGIONAL LEVEL THAT ARE
DIFFERENT THAN THE NATIONAL
LEVEL. THIS IS A BAD NEWS
VERSION, BUT NOT THE ONE WE
THINK IS A PARTICULAR RISK TO
THE REGION. WITH THAT, I WILL
TURN IT OVER TO TALK ABOUT THE
REGIONAL FORECAST.
>> THANK YOU VERY MUCH. THE
NEXT COUPLE OF SLIDES WE WILL
SHOW THE UPDATED REGIONAL
FORECAST. THE SEATTLE METRO
AREA. WE CANNOT REALLY RELEAS
A DETAILED FORECAST FOR SEATTLE
CITY. THE MODEL DEVELOPED IS
FOR THE METRO AREA. REGIONAL
EMPLOYMENT, REGIONAL INCOME,
HERE WE MEAN INCOME IN THE
METROPOLITAN AREA. THE CHART O
THE LEFT SHOWS THE APRIL AND
AUGUST FORECAST FOR EMPLOYMENT
YOU CAN SEE THE RED LINE ON
THE LEFT IS BELOW THE ORANGE
LINE . PART OF IT IS A REVISION
OF THE DATA FOR THE SECOND HAL
OF 2022. THEY LOWERED
EMPLOYMENT ESTIMATES BY ABOUT
1.5 PERCENT. WE ARE STARTING
FROM A LOWER POINT. AS YOU CAN
SEE, EMPLOYMENT IS EXPECTED TO
CATCH UP AND ESSENTIALLY GET T
WHERE WE WERE EXPECTING IT NEED
TO BE BY 2024 WHEN WE WERE
WORKING ON THE APRIL FORECAST.
FROM 2024 ONWARD, THE FORECAST
FEATURES THE SAME KIND OF SOFT
LANDING. VERY SLOW GROWTH. I
SAW A QUESTION.
>> SORRY, WRONG CAMERA.
>> THAT'S OKAY.
>> THERE WE GO. I JUST HAD A
QUESTION. ON THE GRAPH ON THE
LEFT, WHAT YOU ARE SAYING IS
THAT THE ACTUAL IS ACTUALLY
LOWER. THIS IS DATA FROM THE
EMPLOYMENT SECURITY DEPARTMENT,
BUT THAT WILL CATCH UP RIGHT
BACK TO WHAT THE FORECAST MODEL
WOULD HAVE PREDICTED BACK IN
APRIL ANYWAY?
>> YES. THAT IS ESSENTIALLY
WHAT IT IS SAYING. IF WE WERE T
LOOK AT THE U.S. EMPLOYMENT
FORECAST, WHAT YOU SEE IN THE
EMPLOYMENT FORECAST FOR U.S. IS
THT THE REDLINE IS ABOVE THE
ORANGE ONE. STARTING FROM 2022
AND COMPARING THE AUGUST
FORECAST AND THE APRIL
FORECAST, THE EMPLOYMENT LEVEL
IS HIGHER THAN WHAT IT WAS
EXPECTED TO BE IN APRIL. S&P
GLOBAL REVISED THEIR
EMPLOYMENT DATA BASED ON THE
RESILIENCE OF THE LABOR MARKET.
AND SO, THAT, IN PART, DRIVES
THE REGIONAL FORECAST AND IT I
CATCHING UP TO THE APRIL LEVELS
WE ARE NOT ABOVE THE APRIL
LEVELS BY 2024 BECAUSE OF THE
DOWNWARD TREND THAT THE MODEL
STILL HAS BUILT IN. WE'RE STIL
TAKING INTO ACCOUNT A COUPLE OF
ADDITIONAL THINGS FOR REGIONAL
EMPLOYMENT. LAYOFFS IN THE TECH
CENTER . THAT WAS BUILT INTO
THE FORECAST. WE TOOK INTO
ACCOUNT PERMIT DATA , WHICH
SUGGESTS THE EMPLOYMENT GROWTH
IN THE CONSTRUCTION SECTOR WILL
BE SLOWER . ESSENTIALLY, SLOWER
THAN THE NATIONAL ONE. AT THE
SAME TIME, THERE HAS BEEN AN
UPWARD REVISION FOR THE LEISURE
AND HOSPITALITY SECTOR. IT HAS
BEEN A MIX OF SEVERAL THINGS
GOING ON HERE AS A RESULT OF
TOTAL EMPLOYMENT EXPECTED TO BE
ROUGHLY WHERE --
>> IS IT FAIR TO SAY THAT THE
ACTUALS THAT WE START FROM ARE
PULLING US DOWN WORD, BUT THE
VARIABLES THAT YOU BASE YOUR
MODEL OFF, NATIONAL VARIABLES,
ARE PULLING IT UPWARD, WHICH IS
WHY IT CONVERGES AT THE SAME
PLACE ?
>> YEAH. AGAIN, WE ARE ALSO
ADDING OTHER THINGS INTO THE
MODEL . THE DIFFERENCES IN
LEISURE AND HOSPITALITY SECTOR
ARE DRIVEN BY DIFFERENCES IN
TOTAL PERFORMANCE, THE OCCUPANC
RATE, THE REVENUE AVAILABLE .
DIFFERENCES BETWEEN THE REGIONA
ECONOMY AND NATIONAL ONE .
CONTINUED RECOVERY OF LEISURE
AND HOSPITALITY OUTPERFORMS TH
NATIONAL ECONOMY. LEISURE AND
HOSPITALITY, FOR EXAMPLE.
>> I MIGHT ADD THAT IF YOU THIN
OF THE POTENTIAL EFFECTS ON TH
REVENUE FORECAST ARE LITTLE BIT
CONFUSING OR COMPLICATED, WE
KNOW WHAT THE REALIZED REVENUES
ARE FOR THE FIRST HALF OF 2023.
WE NOW UNDERSTAND THAT THERE
ARE FEWER JOBS NEEDED TO
RESONATE -- GENERATE THOSE
REVENUES. AS WE LOOK FORWARD WE
THINK ABOUT HOW THE CORRELATION
BETWEEN THE NUMBER OF JOBS IN
REVENUES IS SLIGHTLY DIFFERENT
THAN WE UNDERSTOOD IT TO BE BAC
IN APRIL BECAUSE THERE ARE FEWE
JOBS GENERATING THE MONEY WE AR
SEEING FLOWING IN. ANOTHER
EXAMPLE. IT IS WHY IT IS
COMPLICATED MODELING. THE
INTERACTIONS ARE COMPLEX.
>> LOOKING AT THE REGIONAL
INFLATION FORECAST WITH THE
CHART ON THE RIGHT. HERE WE SEE
SIMILAR REVISIONS AS FOR THE
NATIONAL FORECAST . INFLATION I
COOLING DOWN. WE HAVE LOWERED
THE INFLATION FORECAST LATELY.
GOING FORWARD, WE EXPECT IT TO
BE SOMEWHERE AROUND 2.5% , JUS
SLIGHTLY ABOVE THE NATIONAL ONE
WHILE THERE HAS BEEN VERY
LITTLE CHANGE IN THE FORECAST
OVERALL, THERE ARE A COUPLE OF
THINGS THAT ARE HARDER TO SEE I
THE PREVIOUS SLIDES . WE WANT T
POINTED OUT HERE. WHEN WE ARE
COMPARING GOING FORWARD , THER
ARE SIGNIFICANT DIFFERENCES AT
THE NATIONAL LEVEL AND THE
REGIONAL ONE. PART OF WHAT I A
GOING TO TALK ABOUT IS DRIVEN B
THE SOFT LANDING AND THE
SLOWDOWN IN GROWTH OF THAT S&P
GLOBAL EXPECTS. THEY ARE
EXPECTING SLOWER EMPLOYMENT
GROWTH AND SLOWER IN PAYETTE --
INCOME GROWTH FOR THE NATIONAL
ECONOMY. THERE IS THE SAME SOR
OF EXPECTATION FOR THE REGIONAL
ECONOMY COMPARING REGIONAL
EMPLOYMENT GROWTH, LOOKING AT
THAT CHART ON THE LEFT,
COMPARING REGIONAL EMPLOYMENT
GROWTH GOING FORWARD WITH THE
PRE-PANDEMIC GROWTH RATES. WE
CAN SEE THAT THE EMPLOYMENT
WILL BE COMING AT A MUCH SLOWER
PACE. PRE-PANDEMIC IT WAS ABOUT
2.5% TO 3% ANNUAL GROWTH. 2024
THROUGH 2027, THE GROWTH RATE I
MUCH SMALLER , AVERAGE BELOW
1%. THE REGIONAL MODEL TAKES
INTO ACCOUNT THE EFFECT OF THE
LAYOFFS, THE EFFECT OF A
SLOWDOWN IN THE CONSTRUCTION
SECTOR, DIFFERENCES IN LEISURE
AND HOSPITALITY, AND THAT ON TO
OF THE EXPECTED SLOWDOWN BECAUS
OF OF A SOFT LANDING THE WHOLE
NATIONAL ECONOMY WILL BE
EXPERIENCING. THE CHART ON THE
RIGHT LOOKS AT THE INCOME AS A
MEASURE OF PURCHASING POWER IN
THE REGION THIS IS CONVERTED
INTO REAL TERMS. IT IS NOMINAL
GROWTH RATE IN INCOME ADJUSTED
FOR INFLATION . AGAIN,
PRE-PANDEMIC AND THE PERIOD
STARTING FROM 2024 ARE QUITE
DIFFERENT BECAUSE OF A SOFT
LANDING . THE GROWTH IS EXPECTE
TO BE MUCH SMALLER IN THE
NATIONAL ECONOMY. THAT IS THE
SAME FOR WASHINGTON STATE AND
THE SAME FOR REGIONAL INCOME.
GOING FROM ROUGHLY 5.5 AVERAG
REAL GROWTH BEFORE THE PANDEMI
TO 2.5% GROWTH IN THE NEXT
FIVE YEARS . THAT IS, ON
AVERAGE, A SLOWER GROWTH RATE.
THE REGION IS STILL EXPECT IT T
OUTPERFORM THE NATIONAL ECONOMY
BY A MUCH SMALLER MARGIN . PART
OF THAT IS SLOWER GROWTH AND
HIGH-PAYING TECHNOLOGY AND
BUSINESS SECTORS SLOWING DOWN,
SLOWDOWN IN THE CONSTRUCTION
SECTOR AND OVERALL SLOWDOWN .
>> YOU WILL SEE THIS REFLECTED
IN THE REVENUE FORECAST AND
LONGER-TERM REVENUE FORECAST ,
CONSISTENT WITH THE MESSAGE
DELIVERED PREVIOUSLY THAT
EXPECTATION WILL BE NOTABLY
SLOWER THE NEXT FEW YEARS AND I
HAD BEEN IN THE PRE-PANDEMIC
PERIOD. LAST PIECE TALKS ABOUT
THE PESSIMISTIC FORECAST AND
WHAT THAT LOOKS LIKE.
>> THESE CHARTS SHOW THE
DIFFERENCE IN SIT BETWEEN THE
BASELINE SCENARIO IN RED AND TH
PESSIMISTIC SCENARIO . THEY AR
COMPARABLE, IN GENERAL, TO THE
IMPACT OF A SIGNIFICANT
DOWNTREND IN THE NATIONAL
ECONOMY. INSTEAD OF A SOFT
LANDING PESSIMISTIC SCENARIO,
THAT WOULD MEAN A SIGNIFICANT
JOB LOSS . IT WOULD STILL BE
CONSIDERED A MILD RECESSION BY
GENERAL STANDARDS, BUT IT WOULD
HAVE SIGNIFICANT IMPLICATIONS
ON A NUMBER OF JOBS. AT THE SAM
TIME, THE INFLATION RATE WILL B
HIGHER THAN THE BASELINE
SCENARIO.
>> BEFORE WE TALK ABOUT REVENUE
, WE HAVE A QUESTION FROM TOM.
>> ON THE PRIOR SLIDE, AND I
AM NOT SUGGESTING THIS IS THE
RIGHT THING TO DO, BUT I'M JUST
CURIOUS. GIVEN THAT IT SEEMS
NATIONALLY THE FORECASTERS KEEP
CALLING FOR A WORSE OUTCOME
THAN WHAT WE ACTUALLY EXPERIENC
, IS THERE ANY CONTEXT WHEN YO
START TO LOOK AT THE OPTIMISTIC
SCENARIO AS SOMETHING WORTH
CONSIDERING ? I KNOW THERE ARE
MANY DIFFERENT SCENARIOS THAT
ARE OFFERED BY S&P, AND WE JUS
HAVE THESE THREE, WHICH I THINK
ARE 25% PESSIMISTIC , 25%
OPTIMISTIC, AND 50% BASELINE.
NORMALLY, THE RECOGNITION IS
BASELINE. I'M CURIOUS. IT SEEMS
LIKE WE ALWAYS OUTPERFORM. I AM
WONDERING IF THERE IS SOME SIGN
FOR OPTIMISM.
>> IT IS A TOTALLY FAIR
QUESTION. YOU WILL SEE IN A
MOMENT THAT, IN GENERAL, WE
THINK THERE IS GOOD REASON TO
THINK THAT THE REGIONAL ECONOM
WILL UNDERPERFORM RELATIVE TO
THE NATIONAL ECONOMY. IN THAT
CONTEXT, IT DOESN'T FEEL LIKE
THE OPTIMISTIC FORECAST IS THE
PLACE TO HANG OUR HATS. BUT IF
WE CONTINUE TO BE IN A SCENARIO
WHERE THE LOCAL ECONOMY
CONTINUES TO GROW AHEAD OF THE
NATIONAL FORECAST, AND OUR
REGIONAL MODEL WAS ABLE TO
CAPTURE THAT, AND INFERIORLY --
THEORY, THE REGIONAL MODEL
TAKES THE NATIONAL FORECAST AND
NOT JUST ASSUMES THAT TREND
WILL PERSIST REGIONALLY, BUT
RATHER TRY TO CAPTURE MORE OF
WHAT IS HAPPENING HERE. IT IS
PARTICULARLY RELEVANT, BECAUSE
THINK WE CAN CAPTURE THE RISK
TO THE REGIONAL ECONOMY EVEN
USING THE BASELINE FORECAST
HERE, BUT GIVEN THERE ARE
EXPECTATIONS NEAR-TERM TO
UNDERPERFORM , THAT DOESN'T SEE
LIKE A TIME TO LEAN ON THE
OPTIMISTIC. IF THE REVERSE WERE
THE CASE, IT COULD BE WORTH
DISCUSSION.
>> THANK YOU.
>> I WANT TO WELCOME JEANETTE
BLANKENSHIP ON BEHALF OF THE
CITY BUDGET OFFICE HERE TODAY.
SHE IS IN THE SEAT FOR THE
DIRECTOR. WELCOME. GO AHEAD.
>> THANK YOU SO MUCH. I AM
CURIOUS ABOUT SLIDE 14. WITH
THE FED AT LOWER INTEREST RATES
IN THE OUT YEARS? HOW MIGHT
THAT IMPACT LONGER-TERM
STAGNATION?
>> THE EXPECTATION IS A FEDERA
START TO BRING DOWN RATES THE
MIDDLE OF NEXT YEAR. BUT TO DO
SO GRADUALLY, MODERATED THE
REDUCTIONS AS IT READS WHAT IS
HAPPENING IN THE NATIONAL
ECONOMY OVERALL.
>> THAT IS THE EXPECTATION.
THEY ARE EXPECTED TO COME DOWN
GRADUALLY OVER TIME, BUT
EVENTUALLY STABILIZE AROUND 3%.
STARTING FROM 5.5% , IT WILL G
DOWN TO 3% BY 2026 --
>> COMING DOWN INTO 2026 IS TH
PATH OF REDUCTION. I THINK THEY
WILL READ THE ECONOMY AS THEY
GO. THE EXPECTATION IS THAT IT
WOULD NOT HAPPEN SOONER THAN
THAT EITHER. THAT IS WHY WE
WOULD EXPECT THAT TREND GROWTH
TO BE BELOW WHAT WE HAVE SEEN
IN THE PAST.
>> THANK YOU.
>> UNLESS A RECESSION HAPPENS
AND THEN THE FED WILL TRY TO
STIMULATE THE ECONOMY BY
LOWERING INTEREST RATES
SIGNIFICANTLY AND QUITE FAST.
>> THE MOST APPROPRIATE
FORECAST, IN MY HEAD, THIS WAS
CHOICE BETWEEN THE PESSIMISTIC
AND THE BASELINE. THIS SLIDE
WILL GIVE YOU A SENSE OF THE
NATIONAL FORECAST . WE PROVIDED
A COMPARABLE VERSION LAST TIME.
ON THE RIGHT IS A GRAPH THAT
HIGHLIGHTS A RANGE OF FORECASTS
THE RANGE COMES FROM A STORY
THE WALL STREET JOURNAL DOES.
THEY DID THIS IN JULY BASED ON
INFORMATION FROM JUNE. THEY LOO
AT SEVERAL ECONOMIC METRICS .
IN PARTICULAR, INFLATION,
FEDERAL FUNDS RATE, AN
EMPLOYMENT, AND GDP GROWTH. TH
GRAY DOTS SHOW THE FULL RANGE O
FEEDBACK THEY RECEIVED. THEY
SURVEYED 70 ECONOMISTS FROM THE
BUSINESS WORLD AND ACADEMIC
WORLD. S&P GLOBAL IS THE RED
DOTS. THE AVERAGE OF THE GRAY
DOTS IS THE BLUE ONE. MOODY IS
ANOTHER NATIONAL FIRM ADDED TO
THE SUBSCRIPTION BASE. WE GET
SOME INFORMATION FROM THEM. THE
BOTTOM LINE IS THAT S&P ARE WEL
WITHIN THE MIDPOINT OF THE
RANGE OF NATIONAL FORECASTERS.
THEY OFTEN ARE SOMEWHAT
CONSERVATIVE. IF ANYTHING, THEI
LITTLE BIT OPTIMISTIC. THEIR
SENSE OF INFLATION IS RIGHT
WITH EVERYBODY ELSE'S. THEY
EXPECT THE FEDERAL FUNDS NEED T
BE A LITTLE BIT HIGHER , BUT
THEY EXPECT UNEMPLOYMENT RATE T
BE A LITTLE BIT LOWER THAN
OTHERS. THEY ARE FORECASTING
GDP GROWTH , 2023 GROWTH, TO BE
SOMEWHAT HIGHER. ON THAT ONE
THEY SEEM TO HAVE BEEN RIGHT.
THE NUMBERS HAVE BEEN UPDATED
SINCE THE SURVEY WAS TAKEN. IN
GENERAL, EVERYONE IS UPGRADING
THE GDP FIGURES. BASICALLY, TH
POINT IS THAT WE THINK S& P IS
WELL WITHIN THE MID RANGE AT TH
NATIONAL LEVEL. IS THERE A
QUESTION?
>> THAT WAS MINE. THAT WAS A
MISS HAND.
>> OKAY, WE ARE READY FOR YOU
NEXT TIME.
>> LET'S TALK ABOUT OUR
SPECIFIC RECOMMENDATIONS. THER
IS GOOD REASON TO THINK, AND WE
ARE TELLING YOU, THE REGIONAL
ECONOMY WILL FACE STRONGER
HEADWINDS THAN THE COUNTRY AS
WHOLE. THE TECH SECTOR HAS BEEN
A KEY DRIVER FOR US, AND IT IS
SLOWING DOWN. WORK FROM HOME IS
SOMETHING AFFECTING OUR ECONOMY
SOME WAYS MORE THAN THE NATION
AS A WHOLE. WE THINK THAT IS
STARTING TO RIPPLE THROUGH OTHE
SECTORS. WE HIGHLIGHTED
CONSTRUCTION. OUR EXPECTATION
FOR THE REGIONAL ECONOMY IS
THAT IT WILL DO AS WELL AS THE
NATIONAL ECONOMY FOR THE NEXT
LITTLE WHILE. WE ALSO THINK TH
REGIONAL MODEL IS DESIGNED TO
CAPTURE THAT. THAT IS WHY WE
HAVE DEVELOPED THAT MODEL.
CONSISTENT WITH THAT COMMITTEE
WILL SEE THIS WHEN WE SHOW YOU
THE REVENUE NUMBERS, OUR
REVENUE FORECAST IS CAPTURING
THE EXPECTED CHANGES IN THAT
REGIONAL ECONOMY. WE THINK WE
ARE ABLE TO MODEL THE
DIFFERENCES BETWEEN A REGIONAL
ECONOMY AND THE NATIONAL ONE.
ANOTHER REASON OUR
RECOMMENDATION IS TO USE THE
BASELINE IS THAT THE
PESSIMISTIC SCENARIO IS REALLY
CAPTURING A SET OF RISKS THAT
ARE DIFFERENT THAN THE ONES WE
ARE SEEING HERE. THEY ARE
MODELING IT SHORT-TERM IMPACTS
OF ESCALATING THE RUSSIAN WAR
AGAINST UKRAINE. THE REGIONAL
ISSUES WE SEE HAVE TO DO MORE
WITH CHANGES IN THE TECHNOLOGY
SECTOR AND THE MIX OF THE
REGIONAL ECONOMY. SO AGAIN, WE
ARE EXPECTING THE REGIONAL
ECONOMY TO DO NOT AS WELL AS TH
NATIONAL ONE. WE THINK WE'VE
ALREADY CAPTURE THAT IN THE
FORECAST. THAT IS WHY WE ARE
RECOMMENDING THE BASELINE. AS W
GO FORWARD WITH THE REVENUE
NUMBERS , WE WILL HIGHLIGHT WHA
THINGS WOULD LOOK LIKE UNDER TH
PESSIMISTIC SCENARIO, BUT THE
ATTENTION WILL BE ON THE
BASELINE SITUATION BECAUSE THA
IS THE RECOMMENDATION. WITH
THAT, I WILL SHIFT TO ACTUALLY
TALK ABOUT THE REVENUES. WILL
DIVE RIGHT INTO A TABLE THAT
YOU HAVE COME TO KNOW AND LOVE,
OR AT LEAST ANTICIPATE. THIS IS
THE DETAILED SUMMARY OF THE
GENERAL FUND REVENUE FORECAST.
CAN WALK YOU THROUGH THE
STRUCTURE OF THE TABLE . IT IS
LOT OF NUMBERS. THE REVENUE ON
THE LEFT IS THE MAJOR REVENUE
STREAMS WE'RE TRACKING. SOME OF
THEM REPRESENT CATEGORIES WHER
WE ARE GROUPING A NUMBER OF
SMALLER REVENUE STREAMS. THE
MOST SIGNIFICANT ONES , PROPERT
TAX SALES, UTILITY TAXES LISTED
AT THE TOP. THE FIRST COLUMN OF
NUMBERS IS THE 2022 ACTUALS.
THAT IS THE REVENUES WE TOOK IN
LAST YEAR. THAT IS GIVING YOU A
SENSE OF GROWTH ARE NOT RELATIV
TO THAT. THE SECOND SET IS THE
APRIL FORECAST. THOSE ARE
FIGURES WE BROUGHT TO YOU LAST
APRIL FOR 2023. THE SECOND
COLUMN IS THE NEW FORECAST FOR
2023 . AND THEN TO THE RIGHT OF
THAT IS THE DIFFERENCE. I WILL
SPEND SOME TIME WALKING THROUGH
THE DIFFERENCES BETWEEN THE
FORECAST AND WHAT THAT IS
SHOWING. FOR 2024, PROVIDING
THE APRIL FORECAST, THE AUGUST
FORECAST, AND THE DIFFERENCE,
AND ON THE FAR RIGHT IS THE
COLUMN THAT SUMS THE
DIFFERENCES. YOU CAN SEE THE
CHANGE OVER THE TWO-YEAR
BIENNIUM. THE SHADING -- THE
REVENUE STREAMS IN BLUE ARE THE
PRINCIPAL RESPONSIBILITY IN THE
FORECAST OFFICE. WE DO PROPERTY
TAX IN COLLABORATION WITH THE
BUDGET OFFICE. THOSE ARE
HIGHLIGHTED, THE ONES THAT
REMAIN UNDER THE PURVIEW OF THE
BUDGET OFFICE. I WILL WALK
THROUGH ALL OF THIS, BUT I WILL
TURN TO THE BUDGET OFFICE TO
HIGHLIGHT SOME OF THE CHANGES.
>> THE ONES THAT ARE SHADED IN
BLUE ARE THE PURVIEW OF --
>> THE FORECAST OFFICE, IN
PARTICULAR. THE WHITE ONES ARE
THE BUDGET OFFICE. SORRY.
>> OKAY, GREAT. AND THIS IS FOR
FOLKS WHO ARE WATCHING. THIS IS
WHY WE INVITE CBO AND THE
REVENUE FORECAST PRESENTERS TO
THE FINANCE COMMITTEE THE WEEK
FOLLOWING THESE PRESENTATIONS T
GET THE COLLECTIVE VIEW. AS
DIRECTOR NOBLE NOTED, HAVING
CBO IS VERY HELPFUL. APPRECIATE
THE SHARED PRESENTATION AS WELL
>> I SHOULD FURTHER ADD THAT OU
ECONOMIC FORECAST FOR THE
REGION, THE ONE THAT THE
FORECAST OFFICE PREPARED, IS
SOMETHING WE THEN GIVE TO THEM
SO THEY CAN DEVELOP SOME OF
THESE FORECASTS , BECAUSE SOME
OF THEM ARE DEPENDENT ON THE
ECONOMY AS A WHOLE AS WELL.
THERE IS INPUT ON THOSE AS WELL
THAT IS TO GIVE YOU THE
BACKGROUND. LOOKING AT WHAT HA
CHANGED. THE FIRST DIFFERENCE
COLUMN UNDER 2023, THESE ARE I
THOUSANDS OF DOLLARS. UP ABOUT
$1 MILLION ADDITIONAL PROPERTY
TAX VALUE EXPECTED IN 2023.
THAT IS LARGELY A RESULT OF
TIMING OF PAYMENTS AND THE LIKE
HIGHLY PREDICTABLE REVENUE
STREAM. FOR 2023 , WAS NO
CHANGE IN THE RETAIL SALES TAX.
WE PERFORMD SLIGHTLY ABOVE
EXPECTATION TO DATE, BUT NOT
MEANINGFULLY. OCCUPATION TAX,
ESSENTIALLY NO CHANGE. ON
UTILITY TAX , POSITIVE CHANGE
ON PRIVATE TAXES. I WILL TURN
THIS OVER TO SEAN THOMPSON, WHO
HAS TAKEN THE LEAD RELATED TO
PRIVATE UTILITIES. HE CAN GIVE
MORE INSIGHTS FOR WHAT IS GOIN
ON THERE. HE MAY ALSO TALK ABOU
WHAT IS GOING ON IN 2024 WITH A
DECLINE IN THAT EXPECTATION.
>> THANK YOU. ASK FOR 2023,
PRIVATE UTILITY TAX REVENUES
WERE REVISED BY 420,000,
OVERALL COMPARED TO THE
MAGNITUDE OF COLLECTION OF
REVENUE STREAMS THAT A HUGE
STRANGE, BUT THE MAJOR DRIVERS
WERE PRIMARILY NEW, STRONGER
RESULTS FOR THE FIRST TWO
QUARTERS FOR STEAM AND NATURAL
GAS REVENUES. THIS IS MOSTLY DU
TO A COLDER AND LONGER WINTER.
LIKEWISE, WE ALSO HAD REVISIONS
WITHIN TELEPHONE, BUT
ULTIMATELY, FOR 2023, THERE IS
AN UPPER REVISION. ASK FOR 2024
WE HAD A DOWNWARD REVISION OF
810,000 WITH THE MAIN DRIVERS
BEING NATURAL GAS AND TELEPHONE
. FOR THE MOST PART, THE
REMAINING PRIVATE UTILITY TAXES
SUCH AS GARBAGE AND
CABLE-TELEVISION WERE PRETTY ON
PAR FOR WHAT WE WERE
FORECASTING. IN BRIEF, SLIGHT
REVISIONS UP RICHARD 2023, AND
DOWNWARD FOR 2024. BUT NOTHING
OF PARTICULAR CONCERN.
>> THANK YOU. ON THE PUBLIC
UTILITY SIDE SOME OF THE SAME
EFFECTS. A COLD WINTER WAS GOOD
NEWS IN TERMS OF ENERGY SALES.
THAT INCREASED THE FORECAST FOR
2023 SIGNIFICANTLY. THERE WAS N
CHANGE FOR 2024. OTHERS
NOTABLE THINGS HERE, THE CHANGE
IN COURT FINDS . I WILL TURN
THIS OVER TO ALEX IN THE BUDGE
OFFICE TO EXPLAIN WHAT IS GOING
ON THEIR.
>> GOOD AFTERNOON. FOR COURT
FINDS, THE SIGNIFICANT UPTICK
FOR 2023 IS MOSTLY ACTUAL
PAYMENTS THAT HAVE COME IN FRO
A BACKLOG OF UNPAID CITATIONS
THAT HAVE BEEN BUILDING UP
DURING THE PANDEMIC . JUST A
REMINDER, THE COURT SUSPENDED
AT THE ONSET OF THE PANDEMIC I
MARCH 2020 THE DEFAULT ON
COLLECTIONS PROGRAMS FOR
CITATIONS IN RESPONSE TO THE
ECONOMIC SHOCK OF THE PANDEMIC.
THOSE HAVE RESUMED AT THE
BEGINNING OF THIS YEAR. SO WE
HAVE BEEN SEEING ACTUAL PAYMENT
THAT WE HAVE NOW INCORPORATED
INTO THE FORECAST. WE DO EXPEC
THAT TO BE A ONE-TIME SPIKE.
GOING INTO 2024, WE SEE A MUCH
SMALLER INCREASE, MOSTLY DUE TO
JUST AN INCREASE , EXPECTED
INCREASE IN CITATION VOLUME.
>> SO THAT IS HELPFUL TO KNOW
WITH REGARDS TO 2023. LOOKING A
2024, WE HAVE UPDATED -- IT IS
NOT ON THIS TABLE, BUT WHEN YOU
REFERENCE BACK TO THE ADOPTED
BUDGET, IT SEEMS THAT THE
AUGUST FORECAST IS NOW $6
MILLION BELOW WHAT WAS ADOPTED
FOR 2024. I AM CURIOUS WHAT TH
DRIVERS ARE FOR THAT. WHY WOUL
WE EXPECT $6 MILLION LESS FROM
COURT FINDS THAT WHAT WAS
ADOPTED FOR 2024 , OR ENDORSED,
I SHOULD SAY?
>> THAT IS A GOOD QUESTION. I
WOULD THINK THAT IT IS DUE TO
LOWER-THAN-EXPECTED CITATION
VOLUME. I BELIEVE THEY HAVE
ONLY BEEN STARTING TO RAMP UP.
WILL HAVE TO DOUBLE CHECK ON
THAT.
>> THANK YOU SO MUCH.
>> DAVE IS UNAVAILABLE DUE TO
ILLNESS, FOR THE RECORD. GRANT
REVENUES UP SIGNIFICANTLY AS
WELL.
>> FOR 2023, THAT IS DUE TO
FEMA REIMBURSEMENT, AS WELL AS
MIDYEAR SUPPLEMENTAL ASKED. FOR
2024, IT IS DUE TO A HANDFUL OF
GRANTS THAT WERE NOT CAPTURED I
APRIL. I COULD GO TO BUT --
FUND BALANCE TRANSFERS AS WELL.
FOR 2023, THE INCREASE IS
ENTIRELY DUE TO INCREASES TO TH
GENERAL FUND.
>> FOR SERVICE REVENUES AND
REIMBURSEMENTS, IT IS LARGELY
REALIZED DEPARTMENT REVENUE.
AHEAD OF TIME, THEY CAN'T ALWAY
PREDICT HOW MUCH THEY WILL EARN
FROM THE SERIOUS CHARGES AND
REIMBURSEMENTS. OVERALL, THAT I
A MODEST UPWARD CHANGE. I DID
NOTICE A HAND RAISED.
>> GO AHEAD COUNCIL MEMBERS
SWIFT.
>> A QUICK QUESTION ABOUT GRANT
MONEY. I AM ASSUMING THIS MONEY
WE HAVE IN HAND. WE MIGHT NOT
KNOW YET HOW MUCH GRANT MONEY W
HAVE IN 2024. IS THAT CORRECT?
>> THAT IS CORRECT. THAT IS ON
OF THE REASONS THE OVERALL
FORECAST FOR GRANTS YOU'RE OUT
IS LOWER THAN REALIZED. IT IS
HARD TO ANTICIPATE THAT. IF YO
LOOK AT THE BOTTOM, WE HAVE TOL
-- THE TOTALS WITH AND WITHOUT
THE GRANTS. IN GENERAL, GRANTS
ARE USED FOR DEDICATED PURPOSES
ADDITIONAL GRANT MONEY IS IN
PROVIDING RESOURCE TO TAKE ON
NEW CITY OBLIGATIONS OR ADDRESS
CITY NEEDS. YOU NEED TO THINK
ABOUT THOSE IN SOME WAYS
DIFFERENTLY THAN THE OTHER
REVENUE STREAMS.
>> A QUESTION FROM COUNCILMEMBE
WASHINGTON.
>> HELLO. CAN YOU TELL ME, IT
LOOKS LIKE THE TOTAL GENERAL
FUND COMING IN FOR 2024 WAS
LOWER THAN 2023. IS THAT RIGHT?
>> IT IS RIGHT. I WOULD NOTE
THE PARENTHETICAL NUMBERS AT
THE VERY BOTTOM OF THE PAGE,
THOSE ARE MEASURES, IN
PERCENTAGE TERMS OF THE GROWTH
OF THE GENERAL FUND. YOU CAN SE
RELATIVE TO 2022, IN 2022, THE
GENERAL FUND WAS ONE.7 $4
BILLION, IN 2023, MARGINALLY
SMALLER. IN 2024, EXPECTING IT
TO BE 1.$7 BILLION, EXCUSE ME,
1.6 A. ABOUT $50 MILLION LESS.
LESS TOTAL RESOURCE, NOT
INFLATION ADJUSTED, BUT IN
NOMINAL TERMS. IF YOU LOOK AT
THE CHART, YOU WILL SEE TWO
FACTORS ARE LARGELY RESPONSIBLE
ONE IS THE FUND BALANCE
TRANSFERS. THE USE OF PAYROLL
EXPENSE TAX AND OTHER SOURCES
TO SUPPLEMENT THE GENERAL FUND
IS REDUCED BY $25 MILLION GOING
INTO 2024. THE OTHER BIG PLACE
IS IN GRANTS. THE GRANT REVENUE
IS ALMOST -- IT IS NOW MORE
THAN $50 MILLION IN 2023 AND
BARELY $20 MILLION FOR 2024%
DIFFERENCE MAYBE A LITTLE
MISLEADING, BECAUSE ULTIMATELY,
THERE MAY BE ADDITIONAL GRANT
REVENUE IN 2024. BUT THE
TRANSFER IS FOR REAL AND NOTABL
SMALLER. AND THE TOTAL RESOURCE
FOR 2024 R 2.8% LOWER.
>> THANK YOU. SHIFTING TO THE
LAST CATEGORY. A BIG CHUNK OF
THAT, ABOUT IS ADDITIONAL
INTEREST INCOME. WE ARE
BENEFITING FROM HIGHER INTEREST
RATES. SO THAT IS GOOD NEWS.
SHIFTING BRIEFLY TO THE TOTALS
FOR 2023. THERE ARE TWO DISTINC
TOTALS, THE TOTAL INCREMENT IS
ALMOST $32 MILLION. IF YOU TAKE
OUT GRANTS , WHICH GENERALLY
HAVE DEDICATED PURPOSES, JUST
BARELY $23 MILLION. BUT THAT IS
POSITIVE REVENUE FOR 2023. FOR
2024, LET ME HIGHLIGHT THE BLU
CATEGORY TO THE TOP. THOSE ARE
ONES WITH MEANINGFUL DIFFERENCE
FOR 2023. IN PARTICULAR,
POSITIVE INCREMENTS FOR PROPERT
TAX LARGELY DUE TO INCREASED
REVENUE FROM THE EMERGENCY
SERVICES AT LEVY. COUNTY
PROPERTY TAX , RESULTING IN THE
FACT THAT WE ARE PROJECTING
THAT THE CITY TOTAL ASSESSED
VALUE IS EXPECTED TO DECLINE,
BUT THE COUNTIES OVERALL WILL
DECLINE MORE AND REVENUES ARE
BASED ON THE RELATIVE SIZE OF
ASSESSED VALUES. BOTTOMLINE,
MORE MONEY FROM THE COUNTY ON
THE PROPERTY TAX SIDE. RETAIL
SALES ARE UP RELATIVE TO THE
APRIL FORECAST. AS WE ARE
DESCRIBING, WE HAD BEEN
EXPECTING A PERIOD OF EVEN
SLOWER GROWTH IN LATE 2023 AND
EARLY 20 DOING FOR THAT WE ARE
NOW PROJECTING. WITH SO MUCH
STRONGER GROWTH , WE END UP WIT
HIGHER REVENUES FOR THESE
ECONOMICALLY DRIVEN SOURCES.
REALLY DOWN TO THE BOTTOM, THE
NET INCREASE , ABOUT $20 MILLIO
IN TOTAL AND ONLY ABOUT $17
MILLION WHEN YOU EXCLUDE
GRANTS. THE POSITIVE INCREMENT
IN 2024 IS SMALLER THAN IT IS I
2023, ADDING IN TOTAL ON THE
RIGHT TOTAL RESOURCE INCREASE
OF $53 MILLION AND TAKE OUT
GRANTS JUST UNDER 40 . THE
PATTERN HERE IS , PARTICULARLY
ON THE ECONOMICALLY DRIVEN
REVENUE SOURCES AT THE TOP,
CONSISTENT WITH THE FORECAST ,
WE ARE BASICALLY ON TRACK TO
DATE FOR 2023 AND THE FORECAST
IS A LITTLE BIT BETTER FOR 2024
TOM HAS A QUESTION.
>> THANK YOU. I AM CURIOUS
ABOUT THE DROP IN THE LICENSED
PERMITS, INTEREST, AND OTHER
FROM 73 TO 63. BECAUSE LOOKING
BACK AT THE ADOPTED AND
ENDORSED BUDGETS, THEY BOTH
STARTED AT ABOUT $48 MILLION.
IS THAT ALL INTEREST EARNINGS
THIS YEAR, OR IS THERE SOMETHIN
ELSE GOING ON AS TO WHY WE
WOULD NOT EXPECT A SIMILAR LEVE
OF REVENUE IN 2024?
>> I THINK SOME OF THAT IS , FO
2023, THERE WERE ALSO A COUPLE
OF MIDYEAR SUPPLEMENTAL ADS , I
THINK A COUPLE MILLION DOLLARS.
>> OKAY. THANK YOU.
>> FEEL FREE TO JUMP IN ANY
TIME. HAPPY TO HAVE YOUR
QUESTIONS. THANK YOU.
>> THAT IS THE NEAR-TERM
GENERAL FUND PICTURE. BEFORE WE
SHIFT TO TALK ABOUT NON-GENERAL
FUND, I WANTED TO TAKE A LOOK A
THE LONGER-TERM GENERAL FUND ,
IN PARTICULAR, THE ECONOMICALLY
DRIVEN REVENUE SOURCES. THE
FOCUS HERE IS ON SALES AND BNO.
I'M CONSCIOUS THAT WE DELIVERE
A MESSAGE EXPRESSING SIGNIFICAN
CONCERN AND MORNING AT SOME
LEVEL THAT WE EXPECT SLOWER
GROWTH GOING FORWARD, BUT THE
REVENUE TABLE I PUT UP PUTS
MORE MONEY ON THE TABLE. SO HOW
DO YOU RESOLVE THOSE THINGS? TH
ANSWER IS IN THESE CHARTS.
SHOWN HERE ON THE LEFT IS A
FOCUS ON SALES TAX AND ON THE
RIGHT IS B&O. IN THE ORANGE WE
HAVE THE APRIL FORECAST AND IN
THE RED WE HAVE THE AUGUST
FORECAST . THOSE ARE THE TWIN
BARS IN THE UPPER CHARTS . YOU
CAN SEE IN GENERAL THE AUGUST
FORECAST IS THE SAME FOR 2023,
HIRE FOR 2024. WE EXPECT
ADDITIONAL REVENUE ON THE SALE
TAX SIDE FOR 2024. ABOUT THE
SAME FOR 2025. BUT THEN FOR
2026 THROUGH 2028, IT IS
SOMEWHAT LOWER. THE BARS BELOW
ARE HIGHLIGHTING THE DIFFERENCE
BETWEEN THE TWO BARS. IT IS A
POSITIVE INCREMENT IN 2023, MOR
SUBSTANTIAL POSITIVE INCREMENT
IN 2024, BUT THE NEGATIVE
CHANGES. REDUCTION IN
EXPECTATIONS FOR THE OUT YEARS.
THE SAME GENERAL PATTERN HOLDS
FOR B&O ON THE RIGHT. NEAR-TERM
WE EXPECT A SLOWDOWN IN 2024 .
THAT HAS DISAPPEARED, THAT PUTS
MORE MONEY ON THE TABLE FOR
2024. WE ARE NOW INSPECTING
SLOWER GROWTH IN THE YEARS THAT
FOLLOW. WE WERE LISTENING THIS
MORNING TO DISCUSSIONS ABOUT TH
OVERALL REVENUE AND BALANCING
PICTURE, THIS DOES COMPLICATE
THE LONG-TERM SUSTAINABILITY
ISSUES THE CITY IS FACING. I
WANTED TO HIGHLIGHT GOOD NEWS
FOR THE SHORT TERM, BUT ACTUALL
WORSE NEWS, MODESTLY SO, BUT
MEANINGFULLY SO, FOR THE LONGER
RUN AS WELL. WITH THAT, I WILL
TALK ABOUT THAT SORRY, I WAS
GOING TO TALK ABOUT NON-GENERAL
FUND SOURCES. FIRST, I WANT TO
TALK ABOUT HOW THE GENERAL FUN
FORECAST WOULD LOOK UNDER THE
PESSIMISTIC SCENARIO. THAT IS
NOT THE RECOMMENDED SCENARIO,
BUT I WANT TO HIGHLIGHT THE
DIFFERENCES. AGAIN, FOCUSING
PARTICULARLY ON RETAIL SALES AN
B&O. THE DIFFERENT SCENARIOS
WILL HAVE THE LARGEST EFFECT ON
THE ECONOMICALLY DRIVEN REVENUE
SOURCES. THESE ARE THE TWO MOST
OUTSTANDING OF THOSE. WHAT YOU
SEE HERE WITH THE PESSIMISTIC O
THE RIGHT AND THE PALER COLOR,
NOT MUCH CHANGE IN 2023 UNDER
THE PESSIMISTIC SCENARIO. THAT
IS IN NO SMALL PART BECAUSE WE
ARE ALREADY IN AUGUST AND MUCH
OF THE REVENUE HAS BEEN
COLLECTED. BIGGER AFFECTS IN
2024. THAT IS TRUE FOR BOTH
SALES AND B&O. IN 2024, THE
COMBINED EFFECT WOULD BE ABOUT
$30 MILLION DECLINE FROM JUST
THOSE TWO REVENUE SOURCES. AT
THE BOTTOM, FOR THE GENERAL FUN
AS A WHOLE, UNDER THE
PESSIMISTIC SCENARIO, IT WOULD
BE ABOUT $15 MILLION LOWER IN
2023, ALMOST $50 MILLION LOWER
IN 2024. FOR THE BIENNIUM, THE
PESSIMISTIC FORECAST WOULD
REDUCE RELATIVE TO THE FIGURES
WE JUST SHOWED YOU THE FORECAST
BY $63 MILLION. NOTABLE
DIFFERENCE. WE DID WANT YOU TO
HAVE THAT CONTEXT. NOW SHIFTIN
TO NON-GENERAL FUNDS. THE
FORMAT OF THIS TABLE IS THE SAM
IN TERMS OF THE COLUMNS, AND
ALSO IN TERMS OF THE SHADING.
BLUE ARE THOSE COMING FROM THE
FORECAST OFFICE, THE WHITE ONES
FROM THE BUDGET OFFICE. THE MOS
SIGNIFICANT NEWS HERE IS ON TH
PAYROLL SIDE AND THE REALIST
SITE -- REAL ESTATE EXCISE TAX
. ON THE POSITIVE SIDE YOU CAN
SEE MORE THAN $11 MILLION IN
2023 AND JUST OVER $10 MILLION
IN 2024. THE LAST SLIDE
DESCRIBES MORE THE RATIONALE FO
THAT. I WILL COME BACK TO THAT
IN A MOMENT. IN TERMS OF OTHER
REVENUE STREAMS, EMISSION TAX
UP MODESTLY. FOOD AND BEVERAGE
TAX TRACKING CLOSELY TO
FORECAST. SHORT-TERM RENTAL UP
SLIGHTLY , REFLECTIVE OF
REALIZED REVENUES SOMEWHAT AHEA
OF FORECAST. SIGNIFICANT CHANG
IN THE REAL ESTATE EXCISE TAX.
WE'RE RUNNING BELOW FORECAST AN
HAVE RUN BELOW FORECAST FOR EAC
AND EVERY MONTH THROUGH JULY .
YOU CAN SEE IN 2022, THIS WAS A
$90 MILLION REVENUE SOURCE. WE
BROUGHT THE FORECAST DOWN IN
APRIL 2 $55 MILLION AND ARE
BRINGING IT DOWN AGAIN TO JUST
UNDER $51 MILLION AS THE
EXPECTATION FOR 2023 AND A
COMPARABLE REDUCTION FOR 2024.
WHAT WE'RE SEEING HERE ,
EFFECTIVE INTEREST RATES FOR
SURE. THE RESIDENTIAL SIDE,
THAT HAS PLAYED OUT IN AN
INTERESTING WAY. IT APPEARS
SUPPLY -- HIGHER INTEREST RATE
GENERALLY MEAN LOWER HOUSING
PRICES A LOT OF FOLKS WHO HAVE
-- WHO OWN HOMES AND ARE
ENJOYING LOW MORTGAGE RATES ARE
NOT INTERESTED IN SELLING
BECAUSE THEY WOULD HAVE TO GIVE
UP THEIR MORTGAGE, AND THEY
PERCEIVE IF THEY WAIT UNTIL THE
INTEREST RATES COME DOWN, THEY
COULD GET A BETTER PRICE. THERE
IS ALMOST NO VOLUME ON THE
RESIDENTIAL SIDE. ON THE
COMMERCIAL SIDE, THERE IS SO
MUCH UNCERTAINTY ABOUT THE
VALUE, PARTICULARLY OF OFFICE
SPACE, THAT WE ARE NOT SEEN
TRANSACTIONS OF THE LARGE
COMMERCIAL OFFICE TOWERS, WHICH
ARE A SIGNIFICANT SHARE OF
REVENUE. BOTTOM ONE REAL ESTATE
MARKETS ARE MOVING VERY SLOWLY.
DOWNWARD REVISION FOR 2023 AND
2024, IT IS A COMPARABLE ANNUAL
REDUCTION FOR THE REMAINDER OF
THE FORECAST WINDOW AS WELL. TH
NET EFFECT OVER THE SIX YEARS I
$30 MILLION-$35 MILLION
REDUCTION. OTHER CHANGES ARE
RELATIVELY MINOR AND
ESSENTIALLY ECHO THE THINGS WE
HAVE SEEN BEFORE. SALES TAXES U
A LITTLE BIT. WE SAW SALES TAX
OVERALL WAS UP A LITTLE BIT.
COMMERCIAL PARKING TAX UP A
LITTLE BIT IN 2024, BECAUSE
AGAIN, WE EXPECT MORE OVERALL
ECONOMIC REGIONAL ACTIVITY IN
2024 THEN WE WERE PREVIOUSLY.
THE SPEED ZONE ENFORCEMENT IS
RELATED TO THE COURT FINDS
PEACE. IT IS AN ECHO OF THAT, A
SHARE OF THOSE REVENUES GO TO
THAT FUND. BIG CHANGES ON THE
PAYROLL SIDE AND ON THE REET
SIDE. PAYROLL ON THE POSITIVE
AND REET NEGATIVE. TO SAY MORE
ABOUT PAYROLL, A LITTLE BIT OF
BACKGROUND. IN TERMS OF THE
REVENUE STREAM , IT IS.VOLATILE
IT HAS PROVEN TO BE VOLATILE IN
THE TIME WE HAVE BEEN COLLECTIN
IT. IS GENERATED FROM THE
TECHNOLOGY SECTOR PRIMARILY,
ALTHOUGH NOT EXCLUSIVELY, AND
FROM RELATIVELY FEW FIRMS. TO
DEMONSTRATE THAT VOLATILITY, WE
COLLECTED $295 MILLION IN 2021
AND ONLY $223 MILLION IN 2022.
IN TERMS OF INFORMATION WE HAVE
MIDYEAR, FIRMS ARE OBLIGATED T
MAKE QUARTERLY PAYMENTS.
CANDIDLY, WE WERE HOPING TO BE
ABLE TO USE THOSE PAYMENTS AS
INDICATIONS OF WHERE THINGS WER
HEADED FOR THE YEAR. BUT TO
DATE, THERE'S NOT BEEN MUCH
INFORMATION IN THOSE PAYMENTS.
WHAT MOST FIRMS APPEAR TO BE
DOING IS PAYING 25%, A QUARTER
OF THEIR PREVIOUS YEAR
OBLIGATION. THEY DON'T ACTUALL
KNOW WHAT THEIR OBLIGATION WILL
BE UNTIL THE END OF THE YEAR,
BECAUSE IT DEPENDS ON THE ANNUA
COMPENSATION TO FOLKS. BUT THA
IS NOT UNREASONABLE FOR THEM TO
DO. IT MAKES SENSE. IT DOES MEA
WE DON'T KNOW A WHOLE LOT BASED
ON WHAT WE HAVE COLLECTED TODAY
THE WORK WE HAVE DONE IN
MODELING, AND WE SHOWED YOU SOM
OF THE LAST TIME, IS THAT STOCK
VALUES AND PRESENCE IN THE
OFFICE ARE POSITIVELY CORRELATE
WITH PAYMENTS OF THE PAYROLL
EXPECTS TAX. TO DATE, THE
RETURNED OFFICE IS LARGELY
TRACKING WHAT WE EXPECTED TO
SEE. SOME FIRMS ARE LITTLE BIT
AHEAD AND SOME LOWER . ONE THIN
THAT IS DENSELY CHANGED SINCE
APRIL IS EXPECTATIONS AND
REALITIES ABOUT STOCK PRICES.
IN A POSITIVE WAY. THE GRAPH O
THE RIGHT HIGHLIGHTS THE
EXPECTED STOCK PRICE FOR THESE
VARIOUS COMPANIES AT THE END OF
THE YEAR. THE DOT IS THE AVERAG
OF THE EXPECTED PRICE FROM A
RANGE OF STOCK ANALYSTS. THE
BAR IS THEIR OPINIONS. THE GRAD
-- THE GRAY ONES ARE WHAT WE
SHOWED YOU IN APRIL. THE ONES
WITH THE RED DOTS ARE FROM
AUGUST. FOR VIRTUALLY EVERY ONE
OF THE MAJOR FIRMS, THEY ALL
PAY SOME AMOUNT OF PAYROLL
EXPENSE TAX, THEY ARE ALL --
THEY HAVE ALL IMPROVED RELATIVE
TO APRIL. THE EXPECTATION IS
THAT BY YEAR AND THEY WILL ALL
THE STOCK PRICES WILL BE HIGHER
THAN THEY WERE IN APRIL, AND
AGAIN, THE RESULT IS THAT WE
EXPECT COMPENSATION TO BE
HIGHER. HIGHER STOCK PRICES LEA
TO HIGHER COMPENSATION. THAT IS
WHY WE HAVE UPGRADED THE
FORECAST. IN TERMS OF THE
ABSOLUTE DOLLARS, IT IS
RELATIVELY MODEST, ABOUT 4%.
GOING BACK TO THE TABLE, IT IS
ABOUT $10 MILLION . MODESTLY
PERCENTAGE TERMS, BUT IN DOLLAR
TERMS, ARGUABLY SIGNIFICANT.
THAT UPGRADE IS NOT BASED ON
DOLLARS RECEIVED THROUGH THE
DOOR TO DATE, BECAUSE WE DON'T
THINK THOSE TELL US MUCH, IT IS
REALLY MORE ABOUT EXPECTATIONS
OF WHERE THE STOCK VALUES ARE
HEADED FOR SOME OF THE MAJOR
PAYERS. THAT IS THE EXPLANATIO
FOR THAT. AND THAT IS THE END O
THE PRESENTATION. WE ARE HAPPY
TO TAKE QUESTIONS.
>> GREAT. I SEE A HANDFUL OF
QUESTIONS. WE HAVE .
>> THANK YOU FOR THIS
PRESENTATION. IT WAS VERY
INSIGHTFUL. YOU TALK A LOT ABOU
WORK FROM HOME AND RETURN TO
OFFICE AND WHAT WE'RE SEEING IN
THE NEWS AND CORPORATE
BUSINESSES , A PUSH TOWARDS
RETURN TO OFFICE. ARE YOU SEEIN
THAT AS A FACTOR ON THE BASELIN
FORECAST AS WELL AS THE ACTUAL
THAT WE TALKED ABOUT PAYROLL
EXPENSE TAX, BUT THE ACTUAL
RETURNS WE WOULD SEE FOR
REVENUE?
>> WE ARE FOCUSED ON IT IN
TERMS OF PAYROLL EXPENSE TAX. W
HAVE BEEN TRACKING THAT DATA
IN CERTAIN PARTS OF THE CITY. T
DATE, WHAT WE'RE SEEING , ARE
PROJECTIONS ALREADY ANTICIPATE
RETURN TO OFFICE. FOLKS HAVE
BEEN TALKING ABOUT THREE DAYS A
WEEK, ABOUT 60%. THERE IS
VARIATION FIRM TO FIRM, BUT WE
ARE GENERALLY SEEING THAT. I
THINK WE HAVE COME TO
APPRECIATE SOME ADDITIONAL
ANALYSIS WE HAVE DONE THAT WOR
FROM HOME IS ALSO AFFECTING
THINGS LIKE THE B&O RECEIPTS ,
THE WAY TAXES ARE ALLOCATED
WHERE YOU WORK MAKES A
DIFFERENCE. OUR PROJECTIONS AR
TREND PROJECTIONS. THE
EXPECTATION IS THAT THAT WE
WILL CONTINUE TO SEE BENEFIT
FROM RETURN TO OFFICE , BUT AT
THE SAME TIME, THE EXPECTATION
IS NOT THAT WE END UP WITH
EVERYBODY BACK TO WORK FIVE DAY
A WEEK. INTERESTINGLY, ON THE
SALES TAX SIDE, I LESS OBVIOUS
A BENEFIT. A LOT OF THE
SPENDING THAT WAS HAPPENING
DOWNTOWN WAS PROBABLY HAPPENING
ELSEWHERE IN THE NEIGHBORHOOD.
THE DATA SEEMS TO SHOW WE DID
NOT SEE A PRECIPITOUS DROP IN
SALES TAX REVENUE BECAUSE PEOPL
SHIFTED THE CONSUMPTION OF GOOD
RATHER THAN SERVICES. WE
ACTUALLY SAW PRETTY SONG SALES
TAX REVENUE EVEN THROUGH THE
PANDEMIC. THE LACK OF SPENDING
IS PROBABLY REPLACED BY A
CERTAIN AMOUNT OF SPENDING IN
NEIGHBORHOODS. ON THAT, THERE I
STILL A LOSS. THERE IS LESS
TOTAL ACTIVITY HAPPENING IN THE
CITY. THE RECOVERY OF TOURISM I
ALSO HELPING.
>> CAN YOU FOLLOW UP ON THAT?
>> THANK YOU VERY MUCH.
>> GREAT. COUNCIL MEMBERS SWIFT
>> I HAVE A QUESTION ABOUT THE
TAX SECTOR, AND SPECIFICALLY,
THE COMPENSATION JUMPSTART BASE
ON SALARY. IS THAT CORRECT?
>> IT IS BASED ON TOTAL
COMPENSATION.
>> OKAY.
>> TO THE EXTENT THAT STOCK
GRANTS COUNT AS PART OF
COMPENSATION.
>> OKAY. I GUESS MY QUESTION IS
HOW DO WE DETERMINE WHETHER
GROWTH IN TECH IS TRANSLATING
INTO NEW JOBS VERSUS
COMPENSATION.
>> WE'RE MONITORING TOTAL
EMPLOYMENT DATA THAT WE GET FRO
THE STATE. WE ALSO HAVE WAGE
DATA . THAT COMES WITH A
SIGNIFICANT LAG. IT IS HARD TO
KNOW PRECISELY.
>> OKAY.
>> THANK YOU.
>> OF COURSE.
>> ANY ADDITIONAL QUESTIONS?
DIRECTOR NOBLE, IS THERE A SLID
YOU CAN COME BACK TO TO GIVE US
THE HIGH LEVEL SUMMARY
JUMPSTART UP BY 20 $2.5 MILLIO
BY THE BIENNIUM ?
>> I WILL GO TO THE SAME
TABLES. THE FORECAST , THE NEX
ACTION IS WHETHER YOU WANT TO
APPROVE THE FORECAST. WHAT YOU
CAN SEE HERE, THIS IS A
NON-GENERAL FUND , I WILL DO IT
IN REVERSE ORDER. THE MOST
SIGNIFICANT CHANGES ARE TWOFOLD
PAYROLL TAX UP JUST OVER $20
MILLION , AND THAT IS BASED ON
EXPECTATIONS ABOUT STOCK PRICES
REET DOWN ABOUT $10 MILLION
ENTIRELY RELATED TO REALIZED
REVENUES AND EXPECTATIONS ON
INTEREST RATES AND UNCERTAINTY
IN THE OFFICE MARKET THAT WILL
CONTINUE TO SUPPRESS THOSE
REVENUES. THAT IS THE HEADLINE
HERE . IN TERMS OF THE GENERAL
FUND, THE HEADLINE IS, IN 2023
AND SETTING ASIDE GRANTS
INCREMENT OF ABOUT $20 MILLION.
MOST OF THAT NOT ECONOMICALLY
DRIVEN. FOR 2024, POSITIVE
INCREMENT SETTING ASIDE GRANTS
OF $40 MILLION, A SIGNIFICANT
SHARE OF THAT COMING FROM THE
ECONOMICALLY DRIVEN REVENUE
STREAMS. BETTER PART OF $10
MILLION IN PROPERTY TAX, SALES
TAX, AND B&O . BUT THEN ALSO,
SIGNIFICANT REVENUE COMING FRO
COURT FINDS , AND ALSO FROM
PUBLIC UTILITIES. BOTTOMLINE,
OVER THE BIENNIUM , INCREASE OF
$40 MILLION IN THE GENERAL FUND
SETTING ASIDE GRANTS . THE
INCREASE FOR 2024 IS ABOUT $17
MILLION, 2023 IS $22 MILLION. I
TERMS OF ONGOING REVENUES, THE
ADDITION IS PROBABLY MORE IN TH
NEIGHBORHOOD OF TELL ME DOLLARS
FOR 2024. THAT IS THE
ECONOMICALLY DRIVEN PIECE HERE.
AGAIN, ARITY MENTIONED WHAT IS
HAPPENING ON THE PAYROLL SIDE.
I SAW A QUESTION FROM THE
DEPUTY DIRECTOR.
>> I JUST WANTED TO FLAG, FOR
PEOPLE FOLLOWING THE
CONVERSATION FROM THIS MORNING
AND RECENT CONVERSATIONS IN THE
FINANCE AND HOUSING COMMITTING
MEETING, I THOUGHT IT WOULD BE
HELPFUL TO FRAME THIS AS IT
RELATES TO THE ADOPTED BUDGET.
IN GENERAL, IN TERMS OF THE
UPCOMING CONVERSATIONS FOR THE
CITY COUNCIL AND THE MAYOR FOR
BALANCING 2024, THAT WILL BE
THE RELEVANT NUMBER. SO WHILE
THIS FORECAST COMPARED TO THE
APRIL FORECAST IS SHOWING
PAYROLL TAX REVENUES UP, IT IS
STILL, COMPARED TO THE
ASSUMPTIONS , IT IS UP ABOUT
19.$5 MILLION BELOW WHAT WE
BALANCED THE 2023 BUDGET AND
ABOUT $21 MILLION BELOW WHAT W
ASSUMED FOR THE 2024 ENDORSED.
I WANT TO PUT THAT FRAMING .
THERE WILL BE A TABLE THAT SHOW
CALCULATIONS, THE DIFFERENCE
FROM APRIL COMPARED TO NOVEMBER
I WILL ALSO NOTE THAT REET IS
DOWN ABOUT $17 MILLION COMPARE
TO THE 2023 ADOPTED BUDGET AND
ABOUT $14 MILLION COMPARED TO
THE 2024 ENDORSED. THAT IS
FURTHER IN THE HOLE FOR 2023,
AS WELL AS 2024. THOSE WILL BE
SOME OF THE PIECES AND
INFORMATION THE MAYOR AND THE
COUNCIL WILL GRAPPLE WITH AS W
MOVE INTO THE BUDGET
DISCUSSIONS.
>> THANK YOU, DEPUTY DIRECTOR.
THAT IS REALLY IMPORTANT
CONTEXT. WE PURPOSELY TRY NOT T
MAKE THINGS MORE CONFUSING, BUT
IN TERMS OF BUDGETARY DECISIONS
OBVIOUSLY, THE ASSUMED LEVEL IN
THE BUDGET IS A CRITICAL
BASELINE. AT THE FINANCE MEETIN
NEXT WEEK, THAT WILL BE AN
ADDITIONAL FOCUS AS WELL.
>> THAT IS VERY HELPFUL
CONTEXT. I ALSO THINK THE SLIDE
IS GOOD TO DO A COMPARISON TO
THE EARLIER FORECAST IN THE
SPRING. SOME DECISIONS WERE MAD
BASED ON THE REVENUE FORECAST I
APRIL TO WITHHOLD FUNDING AND
NOT MOVE FORWARD. SO TO SEE AN
INCREASE, FOR EXAMPLE, OF
JUMPSTART INVESTMENTS TOTALING
I THINK IT WAS $22 MILLION OVE
THE BIENNIUM , THAT IS A GOOD
INDICATION THAT THAT IS RELATIV
TO THE SPRING FORECAST, BUT ALS
A FLAG TO THE CITY FAMILY THAT
THERE IS ADDITIONAL FLEXIBILITY
THEY ARE WHERE THEY MIGHT NOT
HAVE THOUGHT IT WAS POSSIBLE
BEFORE. BY FLEX ABILITY, I DON'
MEAN FLEXIBILITY ON THE
SPENDING, I MEAN FLEXIBILITY ON
HOW WE RESPOND TO SOME OF THE
REVENUE FORECAST. OKAY. THANK
YOU FOR MAKING IT VERY CLEAR ,
DEPUTY DIRECTOR, THAT THIS IS
GOOD FOR US TO REMIND OURSELVES
THAT THIS IS RELATIVE TO WHAT W
HAD PLANNED IN NOVEMBER. THERE
ARE ABSOLUTELY IMPLICATIONS FOR
THE EXISTING BUDGET , AND THE
UPCOMING BUDGET AS WELL.
ADDITIONAL COMMENTS? ALL RIGHT
QUESTIONS? OKAY. I AM NOT
SEEING ANY. AT THIS POINT, WE
DO HAVE THE OPPORTUNITY TO MAKE
A DETERMINATION OF WHETHER OR
NOT WE ARE GOING TO REJECT OR
CONFIRM THE RECOMMENDATION. ITE
NUMBER THREE ON THE AGENDA IS
DEDICATED TO THIS DISCUSSION.
THE ORDINANCE THAT CREATED THE
OFFICE OF ECONOMIC AND REVENUE
FORECAST AND OUR FORECAST
COUNCIL PROVIDED THIS REVENUE
FORECAST COUNCIL MET WITH THE
WILL TO EITHER CONCUR WITH THE
FORECAST RECOMMENDATION TO
APPROVE THE FORECAST PRESENTED
TODAY. AS A REMINDER, APPROVAL
OF THE RECOMMENDED FORECAST DOE
NOT REQUIRE A FORMAL VOTE. IF
THERE IS CONSENSUS AMONG THE
COUNCIL TO APPROVE THIS
FORECAST, WE ARE DEEMING IT
APPROPRIATE AND CAN DIRECT THE
MINUTES TO REFLECT THAT.
HOWEVER, IF THERE IS A DESIRE T
ADOPT A DIFFERENT APPROACH,
EITHER A PESSIMISTIC FORECAST
FOR A MORE OPTIMISTIC FORECAST,
WE HAVE THE CHANCE TO MAKE SUC
A MOTION AND PUT THAT FORWARD.
DIRECTOR NOBLE, I WILL TURN IT
BACK TO YOU TO SUMMARIZE HERE
TODAY. THE PROPOSAL, AS I
UNDERSTAND IT, IS TO HAVE THE
FORECAST COUNCIL CONSIDER THE
BASELINE FORECAST. ANYTHING ELS
YOU WOULD ADD?
>> NO, THAT IS CORRECT BUT THE
TABLES YOU HAVE SEEN ARE
CONSISTENT WITH THE BASELINE
FORECAST. WE DID HIGHLIGHT THE
SLIDE THAT SHOWED THE HIGH-LEVE
PESSIMISTIC SCENARIO , ABOUT $6
MILLION LESS REVENUE OVER THE
BIENNIUM. BUT THE DETAILS YOU
HAVE SEEN HER FOR THE BASELINE
FORECAST. THAT IS OUR CLEAR
RECOMMENDATION. WE HAVE BEEN
ABLE TO CAPTURE THE RISKS WE SE
TO THE LOCAL ECONOMY, AND ALSO
THE STRENGTHS.
>> OKAY, GREAT. ARE THERE ANY
OTHER QUESTIONS FROM FORECAST
COUNCIL MEMBERS OR CITY BUDGET
STAFF , ESSENTIAL STAFF THAT
YOU NEED CLARIFICATION ON BEFOR
WE MOVE FORWARD? OKAY. I AM NOT
SEEING ANY. I WILL TAKE THAT A
GENERAL INTEREST IN ACCEPTING
THE BASELINE FORECAST AS
RECOMMENDED AND DETAILED IN TH
REPORT WE HAVE RECEIVED AND WIT
THE PRESENTATION OFFERED BY THE
OFFICE OF ECONOMIC AND REVENUE
FORECAST. I AM NOT HEARING ANY
OBJECTION TO THAT. WONDERFUL.
WHERE GOING TO DIRECT THAT THE
FORECAST COUNCIL, EXCUSE ME,
DIRECT THE NOTES TO INCLUDE THA
THE FORECAST COUNCIL MAC CONCUR
WITH THE RECOMMENDATION TO
ACCEPT THE BASELINE FORECAST. W
WILL CONTINUE TO HOPE FOR
CONTINUED OPTIMISTIC RETURNS
AND HAVING THE LAST SIX
MEETINGS OR SO OF THIS COUNCIL
CONTINUE TO SLOWLY SHOW A MORE
POSITIVE TREND . WE DON'T WANT
TO BE OVERLY OPTIMISTIC ABOUT
PROJECTING OUT THE REVENUE
GIVEN THIS IS THE BASIS FOR TH
MAYOR'S PROPOSED BUDGET FOR 202
AND BEYOND, AND THEN THE COUNCI
WILL OBVIOUSLY BE LOOKING AT TH
OCTOBER FORECAST AS WE FINALIZE
THE BUDGET AS WELL. ANYTHING
ELSE FROM THE OFFICE OF ECONOMI
AND REVENUE FORECAST?
>> WE WILL MAKE SURE THE
MEETING NOTES REFLECT THAT
CONCURRENCE. OTHERWISE, WILL
PREPARE FOR THE MEETING COMING
UP IN OCTOBER.
>> SOUNDS GOOD. THANK YOU FOR
ALL YOUR WORK AND THE DUE
DILIGENCE TO REALLY DIG INTO TH
LOCAL AND NATIONAL TRENDS IN
YOUR PARTNERSHIP WITH CBO. THAN
YOU TO CBO FOR BEING PART OF TH
PRESENTATION TODAY. WE WILL SEE
YOU ALL AGAIN FOR A HIGHER LEVE
SUMMARY IN THE FINANCE AND
HOUSING COMMITTEE MEETING NEXT
WEDNESDAY AT 9:30 AM . I BELIEV
THAT IS AUGUST 17. WE WILL
HAVE THE CHANCE TO FIELD
ADDITIONAL QUESTIONS FROM
MEMBERS OF THE PUBLIC OR THE
COUNCIL MAC AT THAT TIME.
APPRECIATE YOU ALL BEING HERE
TODAY. AGAIN, WELCOME TO OUR
NEWEST COUNCILMEMBER AND DEPUT
MAYOR WASHINGTON. VERY MUCH
APPRECIATE ALL OF YOUR
PARTICIPATION IN THE DISCUSSIO
TODAY. AFTER WE RECEIVE THE
PRESENTATION , THE MAYOR WILL
FINISH THE FINAL TOUCHES ON THE
PROPOSED BUDGET FOR THE VIEWIN
PUBLIC. THE PROPOSED BUDGET FRO
THE MAYOR'S OFFICES PRESENTED T
CITY COUNCIL THE LAST WEEK OF
SEPTEMBER. WE WILL SEE THE
REVENUE FORECAST COLLEAGUES
AGAIN IN OCTOBER. THANK YOU VER