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City of Seattle
Gregory J. Nickels, Mayor
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NEWS ADVISORY
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| SUBJECT: Seattle Facing Estimated $20-25 Million Budget Gap
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FOR IMMEDIATE RELEASE:
8/9/2004 12:00:00 PM |
FOR MORE INFORMATION CONTACT:
Alex Fryer (206) 684-8358
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Seattle Facing Estimated $20-25 Million Budget Gap
Revised revenue forecast doesn't alter size of budget problem
SEATTLE - Finance officials told City Councilmembers today an updated revenue forecast confirmed the city of Seattle faces an estimated $20- to $25-million gap in 2005 between projected General Fund revenues and expected costs to continue current services.
“City government still faces major financial challenges next year in spite of small improvements in forecasted revenue,” Mayor Greg Nickels said. “Since 2001, we have cut about $100 million from the General Fund. Because of the recession and recent statewide tax-cutting initiatives, we don’t expect to recover that lost revenue any time soon. Our challenge is to set priorities and work even harder to change the way City government does business.”
The additional budget challenges for 2005 include:
- Streetlight costs ($13 million: $6 million in refunds, plus $7 million for annual operation);
- Several new facilities (especially libraries and community centers) are scheduled to open this year or in early 2005. If operated and staffed under existing models, about $5 million in new costs will result; and
- The 2004 Adopted Budget used $5-10 million of revenues that are not likely to recur for 2005.
Several factors have contributed to the City’s budget problem:
- From 1997-2001, the strong local economy generated significant increases in revenues allowing expansion of many services. Transportation, human services, and the Neighborhood Matching Fund were among the largest growth areas.
- Since 2001, a combination of a deep regional recession and tax limitation measures has limited General Fund revenue growth. Initiative 747, which limits property tax revenue, reduced 2004 General Fund revenue by about $27 million and will reduce 2005 revenue by about $38 million.
- Since 2001, about $100 million in General Fund cuts have occurred mostly focused on administrative departments and departments that experienced the fastest growth in the late 1990s. The city’s Police and Fire departments have received the smallest percentage reductions.
Earlier this year, the mayor and City Council agreed on roughly $9.3 million in cuts to rebalance the city’s 2004 adopted General Fund budget. The city was forced to adjust the adopted budget because of the November State Supreme Court decision prohibiting the city from using City Light funds to pay for streetlights. Nickels is preparing his 2005-2006 proposed budget now, which he’ll deliver to the City Council on Sept. 27.
In June, City Council Budget Chair Richard McIver held community meetings throughout the city to explain the city’s budget process and to gather input from community residents.
“We are not out of the woods yet, and the message from these meetings is there will be disappointment and even anger if we have to cut programs that our residents value. The challenge for my colleagues and me will be to prioritize as we decide which services can be trimmed and which are simply too important to cut. We also have to see if there are opportunities for new revenues,” said McIver.
Nickels said City government must work even harder to manage administrative costs, further unleash the creativity of the City’s employees, and re-examine the City’s approaches for delivery of services. Given the City’s long-term revenue problem, the status quo is not acceptable, the mayor said.
“Inaction will worsen our problem, causing further disruption to city employees and the public,” said Nickels.
Despite this period of economic difficulty, the city’s long-term fiscal health is good, and it has more than adequate reserves to meet its long-term obligations. In addition, Seattle has maintained and in many cases strengthened its long-term financial policies. These policies have ensured that the city maintains its very high bond ratings.
Get the mayor's inside view on initiatives to promote transportation, public safety, economic opportunity and healthy communities by signing up for The Nickels Newsletter at www.seattle.gov/mayor/newsletter_signup.htm.
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Office of the Mayor.
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