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Times' series on spending
(June 2002)
· Part 1
· Part 2
· Part 3
· Part 4

Tuesday, June 18, 2002 - 12:00 a.m. Pacific

Boom days now busting city's budget

By Jim Brunner
Seattle Times staff reporter

By the numbers
The budget climbs $1 billion (1991 to 2001)
Seattle Tax bonanza fades away
Like a reveler the morning after, Seattle city government is waking to discover the good times can leave a whopping headache.

After a four-year binge — when the city hired 1,000 new employees and started building dozens of parks, libraries and a new City Hall — city leaders don't have enough money to keep doing everything they started.

Mayor Greg Nickels is looking at the steepest cuts in at least a decade as he prepares a 2003 budget for submission to the City Council this summer. General-fund revenues next year are expected to be at least $50 million short of the roughly $690 million needed to maintain existing services.

The problem? While the city's tax revenues will rise, they won't rise fast enough to keep up with expenses for city employee wages, health benefits and debt payments on construction projects. City departments are being asked to prepare cuts of up to 15 percent, with smaller reductions for the police and fire departments.

"There have been these bow waves (of spending) that have built up that make this a very difficult job," Nickels said recently. "Everyone will probably be somewhat unhappy."

Just how good were the good times?

City tax collections benefited mightily from the economic boom of the late 1990s. Combined business-, property- and sales-tax collections grew 48 percent — or $133 million — between 1995 and 2000. That was more than double the rate of inflation — and fueled millions in spending on new city programs and employees.

Seattle voters agreed to chip in even more in the form of special property-tax levies for new parks, libraries, community centers and a renovated opera house. That was on top of the annual 6 percent increase in property taxes the mayor and City Council approved every year until 2001, when they took 4.1 percent.

By 2001, total city spending had risen to $2.3 billion, up $1 billion from a decade earlier — an 80 percent increase.

The bulk of that was spending at Seattle City Light and Seattle Public Utilities, which together accounted for $1.3 billion — more than 55 percent — of the city's budget.

The utility budgets are largely predetermined by the cost of supplying electricity and water. So when leaders talk about the city budget, they usually refer to the general fund, the discretionary budget that pays for most other city services — from police and firefighter salaries to pothole repair and homeless shelters.

During the past decade, that budget also grew tremendously, to $600 million in 2001, compared with $356 million in 1991 — a 69 percent increase. Inflation during the same period was about 47 percent while Seattle's population grew 9 percent.

Where'd the money go?

In those 10 years, the city created whole new departments. Mayor Paul Schell, for example, created the Office of Housing in 1998 to administer housing grants and push for low-income housing in the city. The office now employs 57 people and has a budget of $31 million.

General-fund spending on human services nearly doubled, to $26.5 million last year. The city's general-fund spending on road maintenance more than quadrupled, to $38 million last year.

Meanwhile, the Police Department budget grew by a comparatively modest 59 percent during the decade, although at $153 million last year it remains one of the city's biggest expenditures.

Notably, while the parks department added 175 full-time employees and human-services departments added 124, just six more uniformed cops are working for the city today than in 1991. (The department did add more than 100 civilian employees during the past decade, including parking-enforcement officers, dispatchers and administrative aides.)

Seattle City Light is the only major city department to employ fewer people this year than it did 10 years ago, thanks in part to automation of power facilities and other cost-cutting measures. In 1991, the utility had 2,032 employees, compared with 1,800 this year.

Steve Leahy, president of the Greater Seattle Chamber of Commerce, said he doesn't blame city leaders for wanting to spend the tax bonanza. Private businesses, too, went on a hiring and spending spree during the dot-com heyday — not all of which was sustainable.

"We were all flying high," Leahy said. "We all knew in our sober moments it wouldn't last. But hey, why end the party early?"

Voters chipped in more

Seattle voters didn't seem to mind. While other areas of the state followed anti-tax activist Tim Eyman, Seattle residents voted against his initiatives and decided to tax themselves even more.

Between 1991 and 2001, voter-approved property taxes for city government grew 207 percent, compared with 117 percent for taxes that were part of the basic levy.

Unlike other areas of the state, higher taxes haven't been much of an issue in Seattle political campaigns.

"If there isn't any counter pressure, why wouldn't you raise taxes?" said Paul Guppy, who has studied city tax policy as research director for the conservative Washington Policy Center. "In politics, there aren't any problems that can't be solved with a bigger budget."

With plenty of money available, city leaders didn't have to make many hard choices during the last few rounds of budget negotiations. There was enough to go around, and few who sought city money were turned away.

"When you very clearly have the money, it's very hard to say no," City Councilwoman Margaret Pageler said.

That started to change last year, when a recession sharpened by the Sept. 11 terrorist attacks and Boeing layoffs pinched off the flow of taxes to the city.

In 2001, sales-tax collections were lower than the year before — something that hasn't happened since at least the last major Boeing downturn of the late 1970s, according to the city budget office. That trend is expected to continue this year.

As Nickels and the City Council draw up the 2003 budget, they'll have ample reason to start saying no.

Nickels has continued a hiring freeze started by Schell and is predicting a general-fund budget gap of at least $50 million, or about 8 percent of the general-fund budget.

That doesn't mean the city will collect less tax money overall than this year.

In fact, the city expects general-fund revenue of $632 million next year, up from a projected $600 million this year. But city departments say they would need $50 million more to keep doing everything they do now, plus account for inflation and rising wages for city workers.

In addition to putting 1,000 new employees on the payroll, city leaders ran up the municipal credit card during the past four years.

City debt payments hovered at a steady $2 million a year throughout most of the 1990s but began to skyrocket in 1998 and shot up to $16 million this year. That represents the cost of borrowing money to pay for nonvoter-approved projects.

The largest sums will go toward paying off the new City Hall and Justice Center, under construction downtown next to the Municipal Building. Other projects being paid off include a new West Seattle police precinct and street improvements along South Lake Union.

Layoffs are likely

It won't be easy to decide who takes the hit, as Nickels discovered earlier this month when he visited a Central District YWCA packed with advocates for homeless shelters, food banks and other services for the poor.

All were upset that Nickels is asking his human-services department to take a cut of between 9 and 15 percent next year. Most of that money goes to nonprofit organizations that run programs for the poor. Some warned that his budget cuts could be a matter of life and death.

"If you cut services and they aren't there and people die, how do you justify it?" asked a woman from a program for domestic-violence victims.

Nickels responded: "We're not talking about a 100 percent cut. We're talking about a reduction from what we've done over the past five years during the best economy in our city's history."

But that was little solace to human-services providers also facing similar — or worse — cuts from King County, the state, and the federal government.

While Nickels says he will try to cut "low-hanging fruit" first — eliminating air conditioning in city cars, for example — Seattle residents are likely to notice impacts from upcoming budget cuts. Layoffs of city employees are likely, although no one knows how many people will be affected.

Seattle's public libraries, which will close for two weeks this year after a 1.5 percent budget cut rather than lay anyone off, may close even longer next year, faced with Nickels' request they cut an additional 5 percent.

At Seattle Municipal Court, where plans call for eliminating two out of nine judges, lines for paying tickets or court appearances could get longer.

As the cuts come down next year, some may wonder: Couldn't the city have socked away money when times were good?

The city does have $3 million in a "rainy-day fund" set up in 1999 — money that is likely to be tapped to help fill next year's budget gap. (The city also has a $20 million emergency fund, but that's reserved for situations such as terrorist attacks or earthquakes.)

"There was nothing stopping (elected officials) putting away more money during the good times," said Dwight Dively, city finance director. "But the elected officials' priorities were to do projects or expand programs rather than put more money away for a rainy day."

But Dively said the recession has been sharper and more sudden than any other he has seen in 16 years of writing city budgets. The post-Sept. 11 slump was sharpened locally by Boeing layoffs and dot-com busts, he noted.

"When people criticize elected officials and say, 'Oh, you should have seen this coming' — there's some legitimacy to that — but no one could have predicted 9-11 and made allowances for that, that's just not fair," Dively said.

The budget reductions may be painful, but city economists predict Seattle will begin emerging from the slump in a couple of years. That's encouraging news for a city government that relies heavily on retail sales taxes.

"Let's not sell ourselves short," Art Wahl, an economist with CB Richard Ellis, told the City Council at a budget retreat last week. "We've got lots of problems, but we've also got good things going for us."

In the meantime, some officials say a little budget cutting could make city government more efficient in the long run.

"I think we've got a good opportunity to make some choices that we simply couldn't when we couldn't fairly say we don't have enough money," Pageler said.

Jim Brunner can be reached at 206-515-5628 and

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