Today the City of Seattle’s Office of Economic and Revenue Forecasts released its November update to its revenue forecast, which will provide final revenue numbers for the City Council’s 2023 budget.
According to the forecast office, the 2023 General Fund total revenue forecast, according to their three economic scenarios:
- Pessimistic: $1,568,778,000
- Baseline: $1,610,790,000
- Optimistic: $1,627,502,000
The forecast office is recommending the baseline forecast as the basis for the 2023 city budget.
Some notes:
- You know it’s bad news when the first slide is titled “Overall Economic Conditions Have Continued to Deteriorate.”
- And yet, the forecast office is recommending using the baseline revenue forecast, rather than the pessimistic one. There is almost certainly some political pressure around this, as it determines how much money the Mayor and Council have to spend next year.
- One bright spot in the revenue forecast: because of the higher interest rates, the city is earning more interest on its substantial cash balances.
- REET revenue projections are significantly lowered over the next three years, mainly because higher interest rates are depressing the volume of real estate transactions (REET is a per-transaction tax).
- Payroll tax revenue forecasts are largely unchanged, but the report notes that the downside risk is higher. This is a combination of bad earnings for the tech sector, falling tech stock prices that will lower stock-based compensation, and slower hiring in the tech sector (with swirling rumors of layoffs). The city notes that second-quarter 2022 payroll tax payments were lower than first-quarter payments. But the tax is still new enough that there isn’t enough data to predict quarter-by-quarter trends.
- There are predictions of slower hiring rates in the industry sectors that have driven local employment recovery, including technology and professional services.
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