Gonzalez proposes independent city forecasting office

This week Council President Gonzalez is introducing a bill that would move the city’s economic and revenue forecasting office out from under the control of the city Finance Director and into a new, independent Office of Economic and Revenue Forecasts.

According to current city law, the Director of Finance is responsible for “economic forecasting” and “revenue forecasting and analysis,” in coordination with the City Budget Office. The position is appointed by the Mayor and confirmed by the City Council, and reports up through the Director of Finance and Administrative Services to the Mayor. The Budget Director, who runs the City Budget Office, also reports up to the Mayor.

The Finance Director formally provides economic and revenue forecasts to the City Council three times per year:

• in April;
• in September at the beginning of the Council’s annual budget development process, as part of the Mayor’s proposed budget package;
• in early November, to provide a final revenue projection update at the end of the budget development process.

This is important because state law prohibits the city from budgeting its annual expenses at a level higher than “reasonably expected” revenues. There is no formal “approval” of the revenue forecasts; they are simply incorporated into the budget model as delivered. In 2014 the city created an “Economic and Revenue Forecast Advisory Committee,” with six members: the Budget Director, the Finance Director, the heads of Seattle City Light and Seattle Public Utilities, the Council’s Budget Committee Chair, and the Director of the Council’s Central Staff. But that committee is purely advisory, and has apparently only met once in the past five years.

Last fall Council President Gonzalez signaled her intent to strip the forecasting responsibilities out of the executive branch and place them in a new city department that is independent of both the legislative and executive branch. She pushed through a budget amendment that set aside $150,000 for startup costs for such a department, and placed a proviso on another $330,000 of City Budget Office funds to cover part-year expenses for it.

The bill that Gonzalez is introducing this week, and that is scheduled for discussion and possible vote at her committee meeting Tuesday afternoon, follows through on that budget move by formally creating a new Office of Economic and Revenue Forecasts. It also disbands the old advisory council and creates a new Forecast Council with four members: the Council President, the Council Finance Committee Chair, the Mayor, and the Finance Director. That’s two members of the Legislative Branch, and two of the Executive Branch; it does not include the Budget Director, though all four members may delegate their seat to someone in their organization, so the Mayor could delegate theirs to the Budget Director. The Office of Economic and Revenue Forecasts would be required to submit its budget forecasts to the Forecast Council in three versions: baseline, optimistic, and pessimistic; along with a recommendation for which should be approved by the Council. By a three-member majority vote, the Council may adopt the department’s recommendation, approve one of the other two forecasts, or write and adopt its own (if it does none of those, then the department’s recommendation becomes the approved forecast by default).

The new Office would be run by a Director appointed by a three-member vote of the Forecast Council, who can be removed from office the same way. In addition to providing forecasts, the Office would be responsible for:

• providing staffing support for the Forecast Council;
• conducting special studies at the request of the Forecast Council;
• providing ad hoc analytic support on economic and revenue estimates for legislative and executive staff, if included in the Office’s work program (which the Forecast Council writes and may amend at will).

In practice, the Office would forecast about 70% of the city’s general revenue sources; the City Budget Office would do the forecasting for other revenue sources that are closely tied to services provided by city departments (for example, Parks Department permit fees).

To staff up the new office, the City Budget Office would transfer one FTE over (it would keep two positions for its own forecasting work), and half an FTE in the Finance Department would shift to supporting the new department instead of the budget office for forecasting work. In addition, two new positions would be created in the department: one for the new Director, and one for a data analyst. The Council’s staff estimate that the new department would cost $660,000 annually to run; $150,000 would be transferred from the City Budget Office, and about $500,000 is new funding.

The Council staff memo lists five reasons for this effort:

• Addressing (unspecified) concerns that the executive branch might use revenue forecasts as a political tool to promote or discourage legislative initiatives;
• to provide greater transparency on how the forecasts match actual revenues (both prior and current years);
• to “level the playing field” between the legislative and executive branches by giving them equal access to forecasting resources, as well as to forecast data;
• to give both branches confidential access to forecasting expertise, and politically impartial analysis of tax proposals;
• enhanced reporting, since “resources are limited” in the City Budget Office.

The bill, as written, closely follows the model adopted by King County in 2008 when it created an independent forecasting office, including a four-person Forecast Council, with equal representation from the executive and legislative branches, that officially approves forecasts.

It’s not a bad model. But there are several problems with the City Council pushing it through now:

It looks like petty political maneuvering. This plan was hatched last fall when Councilmembers were still angry at the Mayor for her vetoes last summer. This is political payback. And if there was implicit political interference in the forecast process before, this will make it explicit by requiring elected officials to debate and vote to approve the forecast. At a time where there is frequent open warfare between the Mayor and Council, it makes no sense to adopt a model where they need to jointly manage a new Forecast Office. If Gonzalez and the Council are serious about increasing accountability and transparency by spinning out independent departments, then they should start with the City Auditor — who right now can’t audit anything the legislative branch does because it’s housed within that branch of government, and in fact has been co-opted by the Council to help manage its contracts.

It solves a problem that doesn’t exist.  There is no evidence that the city’s current economic and revenue forecasts are politically biased. The Finance Office and City Budget Office have a well-earned reputation for solid, thorough analyses, and their revenue forecasts have been incredibly accurate. There’s nothing inherently wrong with the model of an independent forecasting office, but right now there is no compelling reason to switch. If the Council wants the city to have more forecasting capacity, it can take the money it wants to invest in a new office and simply staff up the existing one.

It creates new problems. To the extent that the City Council is having problems getting information it wants from the Executive Branch, there’s no reason to believe that an independent Forecast Office doing confidential work on behalf of the legislative branch won’t have the same issues. Also, it splits revenue forecasting across even more departments, further complicating the process of assembling the budget. And it’s going to cost money that could be spent on actual pressing problems that the city is facing.

It violates the City Charter.  The Seattle City Charter is clear: except for those explicitly listed in the Charter, all department heads report to the Mayor. Establishing a new Forecast Office requires a charter amendment — not an ordinance written and passed by the Council. King County faced the same issue, and in 2008 it established its independent Forecast Office by charter amendment. Council bills are reviewed by the City Attorney’s Office before introduction; since the bill is on the Introduction and Referral Calendar this week, that means either the Council is getting bad legal advice, or it’s simply ignoring it the advice it’s receiving. Since the bill is modeled on the King County forecast office, which required a charter amendment to be formed, it’s difficult to believe that Gonzalez hasn’t already been informed that she can’t do this by ordinance.

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The bill is on the agenda for Gonzalez’s Governance and Education Committee meeting on Tuesday afternoon.

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