The Partnership between Seattle Businesses and City Government in Providing City Services The Greater Seattle Chamber of Commerce, The North Seattle Industrial Association and The Washington Research Council

Business Is an Important Partner in Providing City Services As either taxpayer or tax collector, business supplies much of the funding for the city’s services Without a healthy business community the city will not be able to provide the services its citizens demand

The City Relies Primarily on Four Taxes: Property, Retail Sales, B&O, and Utility For 1990 property tax 28.5%, sales tax 27.7%, B&O 22.9 % utility taxes 17.9%, other taxes 3.6% Source: City of Seattle, Year 2003

The Share from Property Taxes Increased while the Share from Sales Taxes Decreased

Businesses Pay 54 Percent of These Taxes In contrast, businesses pay 46 percent of state and local taxes statewide. Source: Washington Research Council

But If You Want to Talk Revenue Due to Business Activity, the Total Is 70 Percent In contrast, businesses pay 46 percent of state and local taxes statewide. Source: Washington Research Council

Since the Recession Began in 2001, Tax Revenue Growth Has Slowed Source: City of Seattle

The End of The Recession Will Not Mark the End of the Difficulties Future economic growth will not be as strong as the region has experienced in the past, so revenue will not grow as fast as it has in past expansions Property and B&O taxes are constrained by recent legislation The trend growth in the city’s costs of providing basic services is greater than the expected growth in revenue

For Three Years General Fund Taxes Have Grown by Less than Inflation Source: City of Seattle; U.S. Dept. of Labor

General Sub-Fund Property Taxes (EMS Levy Excluded) Source: City of Seattle; U.S. Dept. of Labor

Retail Sales Taxes Actually Fell for Three Straight Years Source: City of Seattle; U.S. Dept. of Labor

B&O Growth Has Been Anemic for Three Years Source: City of Seattle; U.S. Dept. of Labor

Utility Taxes Grew Strongly in 1999, 2000 and 2001 Source: City of Seattle; U.S. Dept. of Labor

Revenues from the Utility Taxes on Telephones and City Light Have Been Particularly Volatile Source: City of Seattle

The City’s Councilmanic Debt Has Risen Significantly Over the Past Ten Years Some would call this “Councilmaniac” debt. Source: City of Seattle

Growth in the Metropolitan Seattle Region Is Slowing as It Converges to the National Rate Source: U.S. Department of Labor; Conway- Pedersen Economics

Less Favorable Growth Rates Are Projected for Four Key Drivers of City Tax Revenue Source: U.S. Dept. of Commerce; U. S. Dept. of Labor; Puget Sound Regional Council; Conway-Pedersen Economics

Initiative 747, an Eyman initiative Revenue Growth also Will Be Constrained by Initiative 747 and House Bill 2030 Initiative 747, an Eyman initiative “An act relating to limiting property tax increases” Passed November 2001 Limits regular property tax revenue increases to 1 percent per year City gets a further increment of revenue based on new construction Limit can be exceeded with voter approval

House Bill 2030 “An act relating to changing requirements regarding state and local tax to provide for municipal business and occupation tax uniformity and fairness” Enacted in 2003 Requires all cities to use the same definitions and classifications in their B&O taxes Establishes rules under which a business’s revenues will be apportioned among cities and allows each city to tax only those revenues apportioned to it Fully effective in 2008

Revenue is Projected to Grow by 3.1 Percent per Year on Average Source: Washington Research Council, based on Conway-Pedersen and PSRC economic forecasts

Neither Fire nor Police Department staffing grew from 2000 to 2004 Police and Fire Departments Show Underlying Trends in City Service Costs Neither Fire nor Police Department staffing grew from 2000 to 2004 Yet spending for the two departments grew by 21.3 percent over the period, on average 4.9 percent per year We take this 4.9 percent to be the underlying growth rate in the cost of providing current city services

By 2013, the Cost of Current City Services Will Be $161 Million Greater than Projected Revenues Source: Washington Research Council

An Optimistic Scenario: If Spending Grows 3 An Optimistic Scenario: If Spending Grows 3.5 Percent Per Year, the 2003 Gap is $41 Million

But If Revenue Grows at the Rate of Inflation and Spending at 4 But If Revenue Grows at the Rate of Inflation and Spending at 4.9 Percent the Gap Is $208 Million Source: Washington Research Council

There Are Four Ways to Bridge the Gap Cut city services Hike taxes and fees Improve productivity or restrain employee compensation Encourage increased economic activity