More memos: City Budget Director, Council spar over sustainability of budget spending

On the heels of a flurry of back-and-forth memos debating the merits of proposed cuts to SPD’s 2022 budget, now the City Budget Office and the City Council are exchanging dueling passive-aggressive memos over the financial sustainability of the city’s budget in 2023 and beyond.

Yesterday City Budget Director Ben Noble fired off a memo to the City Councilmembers, “to express my concerns about the significant financial challenges the city faces and how upcoming budget decisions could exacerbate the current situation.” Among the points that Noble raises:

  • “A misalignment between City spending and available revenues had been building before the
    pandemic hit, but decreased revenues and increased needs have significantly exacerbated the
    problem, and it will need to be addressed with some urgency. Unless additional revenues are
    authorized next year, the City’s General Fund will be facing a deficit of more than $100 million
    in 2023. If one adds the commitment to fully fund Participatory Budgeting and the Equitable
    Communities Initiative, this figure could approach $200 million.”
  • “The underlying cause is the painful reality that the collective policy goals of the City’s elected leadership exceed the resources currently available to meet
  • “The Council’s budget as currently proposed will provide a balanced spending plan for 2022, but it will also exacerbate funding shortfalls going forward by adding more than $25 million in new, ongoing General Fund spending.”
  • “The $60+ million of revenue backfill provided by Federal Coronavirus Relief dollars in this year’s budget will not be available in 2023, nor the approximately $40 million in one-time funding available from 2021 underspend, nor the payroll tax revenues now being used to sustain General Fund spending, per the Council’s policy direction limiting the future use of these funds.”
  • “[E]ven if a new, ongoing revenue source is authorized to pay for the City’s commitment to community-led investments, the General Fund will still face of a deficit of more $100 million in 2023 and beyond. This implies that if community expectations about continued funding of current services are to be met, additional new revenue sources of this magnitude will need to be  authorized next year for the specific purpose of funding existing commitments, not to pay for new or expanded programs.”
  • “[T]he Council has proposed new revenues, but these would be used to fund new investments, not to address the systemic issues in paying for existing commitments. In addition, the Council has proposed to issue $100 million in debt to meet very real transportation infrastructure needs, but has not identified the long-term revenue source needed to repay this substantial loan.”
  • “The revenue issues we do face, however, are potentially structural ones associated with the
    payroll tax and other funding sources linked to downtown Seattle’s role as a major employment
    center. Continued remote work will negatively impact the payroll tax, and other revenues such
    as the commercial parking tax, that are dependent on robust downtown employment.”
  • “A period of transition in the City’s leadership is not necessarily the best time to resolve such structural issues, but I think it important to note the risks associated with funding decisions that will compound the City’s already challenging financial situation.”
  • “My purpose in highlighting this situation is not to point fingers, but rather to ensure that all are
    aware of the challenges ahead.”

Noble doesn’t advocate in his memo for specific solutions to make the budget sustainable.

In response, this morning Esther Handy, the Director of the Council’s Central Staff, sent a memo in reply that is highly critical of the Mayor and executive branch and defends Councilmember Mosqueda’s balancing package of budget amendments. Some of the points she raises:

  • “The Council and our Central Staff team have been in ongoing conversation with your team at the City Budget Office, with the Executive, and with the public about the sustainability of our General Fund for several years, aware that the growth in expenditures has been outpacing the growth in revenue.”
  • “Nearly two years into the COVID-19 pandemic, there remain many unknowns about economic activity and related tax revenue in 2022, 2023 and beyond. We will know much more about our newest revenue source, the Payroll Expense Tax, in early 2022, when 2021 receipts are received.”
  • “Pre-pandemic, both CBO and the Council acknowledged a pre-existing General Fund short-fall on the order of $39M/year in out years, recognized in the 2020 Adopted Budget six-year financial plan.”
  • “The bill authorizing the payroll tax was returned unsigned by the Mayor, with a note that the Executive did not support the tax and that the novel tax brings uncertainty and indicated that would be acknowledged in budgeting decisions. Despite that concern, the Council has received a Mayor’s Proposed Budget for two consecutive years that relies significantly on the payroll tax to enable the City to build a Balanced Budget in 2021 and 2022 without significant cuts to services or personnel.”
  • “Concurrent with the passage of the new payroll expense tax in 2020, the Council passed Ordinance 126109 (8-1) requesting the Executive to create a spending plan for the new revenue source by June 30, 2021, and we received nothing in response.”
  • “In the absence of Executive leadership, or a willingness to collaborate on this effort, the Council publicly deliberated on, and unanimously adopted a fund and spending policy, in Ordinance 126393.”
  • “It was with great disappointment that we then received the 2022 Proposed Budget on September 27th, balanced based on an undoing of the Jumpstart Fund policies for 2022 and for all future years, and our first analysis focused on restoring those revenues to their intended purpose.”
  • “Like you, I outline these points not to point fingers. Rather, I aim to demonstrate the commitment and track record of both the Council and our Central Staff team to generate creative and fiscally sound solutions in an urgent and timely manner.”

Despite their claims to the contrary, there is a lot of passive-aggressive finger pointing in both memos. There is also a lot of policy advocacy in both, even though both the City Budget Office and the Council’s Central Staff are expected to avoid taking policy positions. This is the second time this week that recently-hired Central Staff Director Esther Handy has weighed in with a memo in support of Budget Chair Mosqueda; earlier this week she wrote one to bolster Mosqueda’s claims that police monitor Dr. Antonio Oftelie had been briefed by the Council on the potential cuts to the proposed SPD budget. That memo was included in a press release sent out by Mosqueda.

Of course, as both memos point out, this is all posturing for the moment; how the sustainability issues around the city’ budget are addressed a year from now will be a matter between Mayor-elect Harrell and the next City Council.

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