City of Seattle Gregory J. Nickels, Mayor

NEWS ADVISORY
SUBJECT:   Nickels, McIver Announce 2004 Budget Proposal
FOR IMMEDIATE RELEASE:    3/5/2004  2:30:00 PM	FOR MORE INFORMATION CONTACT: Martin Munguia, 206-684-8159 Office of the Mayor  (206) 684-4000

SEATTLE - Mayor Greg Nickels and City Council Budget Chair Richard McIver today announced proposed changes to rebalance the city's 2004 General Fund budget and help reduce a series of new facility costs anticipated in 2005.

About $9.3 million in cuts have been identified for 2004 and revised forecasts for 2003 year-end revenues add about another $2 million. All but three General Fund departments took cuts. Seattle Center, Library and the Office of Arts and Cultural Affairs were held harmless in this latest round of cuts. The Neighborhood Matching Fund and uniformed police and fire positions were also spared cuts.

During the last several weeks, Nickels and McIver, Council President Jan Drago, and Councilmembers Richard Conlin and Tom Rasmussen have been reviewing options for budget changes. The Mayor will formally submit the proposal to the Council next week and Council action is expected by early April.

Seattle is seeking to rebalance its 2004 adopted General Fund budget by an estimated $10.5 million because of the November State Supreme Court decision prohibiting the city from using City Light funds to pay for streetlights. The City is also looking ahead to about $4 million in new costs that will result from the opening of several new libraries and community centers next year.

"We did the hard work to get control of city finances," Nickels said. "I applaud the Council for agreeing to collaborate on rebalancing the 2004 budget. We jointly explored options and identified cuts that still manage to preserve the community safety net for the homeless, hungry and poor in our city. We've also kept faith with the voters who approved new libraries and community centers," he added.

"The citizens of Seattle are best served when the Mayor and Council work together, particularly when facing tough challenges, such as this budget problem," said McIver. "Working together we have been able to fashion a responsible proposal to address our 2004 budget challenge, and are proposing to do so without having to touch sworn police officers or fire fighters."

Reductions came from a wide array of functions, including eliminating positions, cutting supply and equipment budgets, reducing contracts for services, and changing city policies.

"As difficult as it has been to make any cuts at a time when there are so many in need, I feel this is a responsible proposal. We have managed to find a way to hold onto funding for domestic violence programs and health care for the homeless. We made every effort to ensure that our communities with the greatest needs were not negatively affected," said Rasmussen.

"The cuts we took were tough, responsible and preserved critical services. I'm especially pleased that there are no further cuts in the Neighborhood Matching Fund and the school crossing guard program," said Conlin. "This was a great example of making good decisions by working together. I truly appreciate and respect the teamwork and commitment of Mayor Nickels and my colleagues, and we couldn't have done it without very effective staff support on both the legislative and executive side."

"Earlier this year the council held community meetings around the city to hear the concerns of citizens. We came away from that process with a series of legislative priorities, the first of which was to focus on creating a budget that is financially sustainable through partnerships, cost savings and possible new revenue sources," said Drago. "We have a partnership, we are doing our best to make this budget sustainable, and the costs savings we anticipate create the least impact on safety and public service. We've saved libraries from cutting their services or hours, and that's a great outcome for me."

The proposal anticipates the reduction of approximately 20 full-time equivalent positions but few, if any, layoffs of city employees.

In November 2004, the State Supreme Court decided Seattle City Light could not pay for the costs of streetlights. This cost, which is about $6 million annually under current rates, must now be borne by the city's General Fund. The 2004 Adopted Budget covers this cost by using $4.2 million from the emergency subfund, which will now be returned for potential emergencies.

It is also possible that the courts will order a refund of past streetlight costs by the General Fund to the Light Fund. This amount could be $23 million or more, depending on how the amount is determined. Paying this off over time using City Light's normal billing practices would cost about $6.2 million in 2004, for an estimated total budget adjustment of $10.5 million.

"The General Fund faces major financial challenges next year," said Nickels. "We must explore changing basic approaches to service delivery. Inaction will worsen our problem, causing further disruption to city employees and the public."

Additional budget challenges for 2005 include:

• Streetlight costs will continue to be billed to the General Fund in 2005 ($6 million).
• Several new facilities (especially libraries and community centers) are scheduled to open this year or in early 2005. If operated and staffed under existing models, about $4 million in new costs will result.
• The 2004 Adopted Budget used $5-10 million of revenues that are not likely to recur for 2005.
• Thus, the potential gap in 2005 between projected General Fund revenues and expected costs to continue current services could top $20 million.

The Mayor implemented a hiring freeze, travel restrictions and a selective spending freeze at the beginning of this year. The mayor announced today that he is continuing these restrictions.

To the maximum extent possible, the mayor and Council members have sought sustainable 2004 budget changes. While one-time savings will help for 2004, they will not address Seattle's 2005 challenges.

Several factors have contributed to the City's budget problem:

• From 1997-2001, the strong local economy generated significant increases in revenues allowing expansion of many services. Transportation, human services and the Neighborhood Matching Fund were among the largest growth areas.
• Since 2001, a combination of a deep regional recession and tax limitation measures has limited General Fund revenue growth. Initiative 747, which limits property tax revenue, reduced 2004 General Fund revenue by about $27 million.
• Since 2001, about $100 million in General Fund cuts have occurred, mostly focused on administrative departments and departments that experienced the fastest growth in the late 1990s. The city's Police and Fire departments have received the smallest percentage reductions.

Despite this period of economic difficulty, the city's long-term fiscal health is good, and it has more than adequate reserves to meet its long-term obligations. In addition, Seattle has maintained and in many cases strengthened its long-term financial policies. These policies have ensured that the city maintains its very high bond ratings.

2004 Midyear Proposed Budget Cuts Summary
2004 Budget Cuts Details

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Office of the Mayor

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