Economic and Revenue Update City Budget Office April 24, 2017 1
U.S. Economy The recovery • Will be 8 years old in June • Is the 3rd longest post-WW II Forecast • Has changed little from last summer & fall • Modest growth to continue • Probability of recession = 20% (IHS/GI) 2
U.S. Economy Annual Growth of Real U.S. GDP 3% 2% 1% 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F 2019F -1% -2% -3% Source: IHS/Global Insight. 3
Puget Sound Economy The region’s recovery • Continues to outpace U.S. • Employment growth slowed in 2 nd half of 2016 • Aerospace cuts • Seattle has led region’s recovery Forecast • Little change from last summer & fall • Risks/uncertainties • U.S. economy • Aerospace • Amazon 4
Puget Sound Economy Monthly Employment Growth 4% 3% Seattle Metro Area* 2% U.S. 1% 0% Apr-10 Sep-10 Feb-11 Jul-11 Dec-11 May-12 Oct-12 Mar-13 Aug-13 Jan-14 Jun-14 Nov-14 Apr-15 Sep-15 Feb-16 Jul-16 Dec-16 -1% * Seattle Metro area = King & Snohomish Co. Growth rate is annualized 6 month moving average of month-to-month growth rates. 5
Puget Sound Economy Seattle Metro Area* Post-Recession Employment Change 25,000 20,000 Aerospace 15,000 Nonstore retailers** 10,000 5,000 Software 0 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 May-10 Sep-10 May-11 Sep-11 May-12 Sep-12 May-13 Sep-13 May-14 Sep-14 May-15 Sep-15 May-16 Sep-16 -5,000 *King & Snohomish Counties. **Nonstore retailers data are for King Co. only. 6
Puget Sound Economy Taxable Retail Sales, 2010 = 100 170 160 Seattle 150 140 Rest of King Co 130 120 Pierce Co 110 100 Snohomish Co 90 2010 2011 2012 2013 2014 2015 2016* *Estimated from data for Q1 - Q3. Source: WA Dept. of Revenue. 7
Regional Economic Forecast Annual Growth of Puget Sound Region* Employment 4% 3% 2% 1% 0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F 2019F -1% -2% -3% -4% -5% *King, Kitsap, Pierce, and Snohomish Counties. Source: PSEF. 8
Sales and B&O Tax Forecast Sales and B&O tax revenue growth to slow • Slowing regional economy • Construction cycle • B&O rate increases will partly offset slowing 9
Seattle Construction Value of Construction Permits Issued 4 quarter moving average in $ millions 1,200 1,000 800 600 400 200 0 2000 Q1 2000 Q4 2001 Q3 2002 Q2 2003 Q1 2003 Q4 2004 Q3 2005 Q2 2006 Q1 2006 Q4 2007 Q3 2008 Q2 2009 Q1 2009 Q4 2010 Q3 2011 Q2 2012 Q1 2012 Q4 2013 Q3 2014 Q2 2015 Q1 2015 Q4 2016 Q3 10
Seattle Construction Taxable Retail Sales, Construction * 600 500 Millions of dollars 400 300 200 100 0 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 *Data are 3 month moving average of seasonally adjusted monthly series. Source: WA Dept. of Revenue. 11
Sales and B&O Tax Forecast Annual Growth of Sales and B&O Tax Revenue 10% 8% 2011-16 average = 7.6% 6% 4% 2% 0% 2010 2011 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F -2% Revenue Seattle CPI 12
Real Estate Excise Tax Real Estate Excise Tax Receipts $90 $80 $70 $60 Millions $50 Residential Condo $40 Commercial $30 $20 $10 $0 13
General Subfund Revenues 2016 2017 2018 GSF - Item Actuals Chg from Nov Revised Chg from Nov Revised Chg from Nov Property Taxes 283,735,368 293,701,000 307,371,000 1,185,368 2,769,000 4,538,000 Sales Taxes 237,249,791 246,010,738 251,816,194 (738,994) 1,070,815 1,068,939 Business & Occupation Tax 234,907,695 (539,135) 253,774,949 715,531 268,594,466 1,941,576 Public Utility Taxes 139,321,324 778,578 150,614,501 1,536,267 156,420,137 1,570,049 Private Utility Taxes 61,558,674 1,701,282 62,106,688 371,165 62,984,722 (515,665) Court Fines 28,222,138 (402,862) 26,428,000 (2,447,000) 28,085,000 (1,540,000) Parking Meters 37,977,097 40,451,000 40,451,000 (836,903) (2,560,000) (5,211,000) Other General Subfund Revenues 145,887,472 28,888,598 110,741,467 2,414,534 113,362,652 1,916,402 General Subfund - Grand Total 1,168,859,559 30,035,932 1,183,828,343 3,870,312 1,229,085,171 3,768,301 Notable Non-GSF Revenues Real Estate Excise Tax 76,434,109 4,912,421 73,534,929 4,184,786 77,810,239 7,430,096 Commercial Parking Tax 39,096,426 (505,957) 41,744,587 696,717 43,623,094 1,076,977 School Zone Camera Fund 13,736,480 698,033 9,357,592 1,186,168 6,957,355 1,026,051 Admission Tax 10,328,191 1,323,823 10,464,348 1,256,984 10,701,205 1,286,211 14
General Fund Balancing 2016 2017 2018 Beginning Fund Balance $50,652 $55,405 $24,846 Revenues $1,168,860 $1,183,828 $1,229,085 Expenditures ($1,147,464) ($1,191,732) ($1,219,869) Potential Backfill for a Portion of DOJ Cuts ($5,000) ($5,000) Potential Renewal of 2017 "One-time" Homelessness Funding ($4,500) Reserves ($16,642) ($17,655) ($32,492) Ending Fund Balance $55,405 $24,846 ($7,929) This table includes the spending proposed in the 1 st Quarter Supplemental Ordinance. Reflects partial back-fill of potential reduction in DOJ grants, but not broader Federal reductions, which are not known at this time. Also reflects continuation of $4.5M in 2017 “one - time” funding for homelessness services that is not currently included in the 2018 endorsed budget. Potential for resources from renewal of the King County Veterans and Human Service Levy to address this need. Departments have been asked to submit reduction proposals of 0% - 2% to restore the 2018 General Fund budget to balance. 15
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