Falling Seattle tax revenues make 2010 budgeting hard

As it begins deliberations on the city's 2010 budget, the Seattle City Council faces a gloomy task made particularly onerous by the recession.

The council's budget committee was given the bad news Wednesday by the city's finance staff:

• Sales-tax revenue is expected to be $25 million less than what had been forecast for the coming year.

• Real-estate excise-tax revenue has fallen by 70 percent from 2007.

• Business-and-occupation-tax revenue is expected to be down next year, too.

The projected drop in income isn't a problem just for Seattle.

Seattle budget officials say between October 2008 and June 2009, Bellevue experienced an almost 17 percent decline in sales-tax revenue. King County was hit with a 14 percent decrease. Kent topped the list with a decrease of more than 18 percent. In Seattle, the decline was close to 10 percent. What partially shielded Seattle from an even worse financial fate, said Glen Lee, of the city budget office was Seattle doesn't rely heavily on sales tax from auto sales as do several suburban cities. Car sales took a huge hit last year.

"There was a profound dramatic reduction in all measures of the economy," said Lee. "It was the worst recession since the Depression. No economist expected the financial meltdown, and this was a stunning event."

He said it was very difficult for the economics profession a year ago to predict how severe the economic downturn would be.

"We may be turning around, but a year ago we didn't expect 5 percent of the jobs in Puget Sound to go away," Lee said.

Council members were told health-care costs for city employees are soaring, growing from $75 million in 2002 to an estimated $140 million for the 2010 budget, and that's with only a small growth in the number of city employees.

Mayor Greg Nickels last week presented his 2010 budget, announcing cuts to fill a $72 million budget hole.

He proposes eliminating more than 300 city jobs, requiring furloughs from most employees and raiding the city's rainy-day fund.

The budget also calls for an 8.8 percent increase in City Light rates, beginning in January.

City Light took a hit because the city isn't making as much money selling surplus power as had been anticipated, said budget director Dwight Dively.

As demand plunged, Seattle is making only about half of what it had hoped to earn from selling power. While the 2009 budget assumed the city would make $140 million on surplus sales, the city made only about half that amount, leaving a $70 million gap.

That mostly was driven by low natural-gas prices, said Dively, and that drove down wholesale energy prices.

The City Council has scheduled three public hearings on the budget, all at 5:30 p.m:

• Wednesday at Whitman Middle School, 9201 15th Ave. N.W.

• Oct. 14 at the Northwest African-American Museum, 2300 S. Massachusetts St.

• Oct. 26 at City Hall, Fifth Avenue at Cherry Street.

Susan Gilmore: 206-464-2054 or sgilmore@seattletimes.com