Economic and Revenue Update City Budget Office April 24, 2017 1 - - PowerPoint PPT Presentation

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Economic and Revenue Update

City Budget Office

April 24, 2017

U.S. Economy

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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)

U.S. Economy

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• 3%
• 2%
• 1%

0% 1% 2% 3% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F 2019F

Annual Growth of Real U.S. GDP

Source: IHS/Global Insight.

Puget Sound Economy

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The region’s recovery

• Continues to outpace U.S.
• Employment growth slowed in 2nd 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

Puget Sound Economy

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• 1%

0% 1% 2% 3% 4% 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

Monthly Employment Growth

Seattle Metro Area* U.S.

* Seattle Metro area = King & Snohomish Co. Growth rate is annualized 6 month moving average of month-to-month growth rates.

Puget Sound Economy

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• 5,000

5,000 10,000 15,000 20,000 25,000 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17

Seattle Metro Area* Post-Recession Employment Change

Aerospace Nonstore retailers** Software

*King & Snohomish Counties. **Nonstore retailers data are for King Co. only.

Puget Sound Economy

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90 100 110 120 130 140 150 160 170 2010 2011 2012 2013 2014 2015 2016*

Taxable Retail Sales, 2010 = 100

Seattle Rest of King Co Pierce Co Snohomish Co

*Estimated from data for Q1 - Q3. Source: WA Dept. of Revenue.

Regional Economic Forecast

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• 5%
• 4%
• 3%
• 2%
• 1%

0% 1% 2% 3% 4% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F 2019F

Annual Growth of Puget Sound Region* Employment

*King, Kitsap, Pierce, and Snohomish Counties. Source: PSEF.

Sales and B&O Tax Forecast

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Sales and B&O tax revenue growth to slow

• Slowing regional economy
• Construction cycle
• B&O rate increases will partly offset slowing

Seattle Construction

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200 400 600 800 1,000 1,200 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

Value of Construction Permits Issued

4 quarter moving average in $ millions

Seattle Construction

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100 200 300 400 500 600

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

Millions of dollars

Taxable Retail Sales, Construction*

*Data are 3 month moving average of seasonally adjusted monthly series. Source: WA Dept. of Revenue.

Sales and B&O Tax Forecast

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• 2%

0% 2% 4% 6% 8% 10% 2010 2011 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F

Annual Growth of Sales and B&O Tax Revenue

Revenue Seattle CPI

2011-16 average = 7.6%

Real Estate Excise Tax

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$0 $10 $20 $30 $40 $50 $60 $70 $80 $90 Millions

Real Estate Excise Tax Receipts

Residential Condo Commercial

General Subfund Revenues

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GSF - Item Actuals Chg from Nov Revised Chg from Nov Revised Chg from Nov Property Taxes 283,735,368 1,185,368 293,701,000 2,769,000 307,371,000 4,538,000 Sales Taxes 237,249,791 (738,994) 246,010,738 1,070,815 251,816,194 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 (836,903) 40,451,000 (2,560,000) 40,451,000 (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 2016 2017 2018

General Fund Balancing

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• This table includes the spending proposed in the 1st 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.

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)