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Tuesday, December 2, 2003 - Page updated at 12:00 AM

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Seattle on track for huge deficit, think tank says

Seattle Times staff reporter

A report released by business groups yesterday warns that Seattle's budget woes will only grow over the next decade unless the city controls spending or finds ways to encourage business growth to bring in more taxes.

The report by the Washington Research Council projects Seattle would face a budget gap of $161 million by 2013 under the city's current spending trends.

"This is not going to be a condition where we'll pop out of the recession and money is going to come gushing in," said Kriss Sjoblom, an economist for the business-backed think tank.

After a period in the 1990s when record tax collections poured into city coffers, the spigot has been turned off. Budget writers faced a $60 million budget gap last year and a $24 million shortage this year. This year's gap grew by $6 million more after the state Supreme Court ruled the city could no longer charge electricity ratepayers for streetlights.

The City Council recently signed off on a 2004 general-fund budget of $666 million. But both the council and mayor admit they'll have to come back early next year to make further adjustments as a result of the streetlights decision.

Unless major changes are made, the study estimates, the city will continue to face money problems because revenue growth averaging 3.1 percent a year will be outstripped by a growth in city expenses averaging 4.9 percent.

Seattle officials agreed with the general thrust of the study but weren't sure the situation was as dire as depicted by the report.

"The formula is basic, whether it's business or government: Revenues need to equal expenses," said City Councilwoman Jan Drago, the council's lead budget writer.

Technically, there is almost no way the city would face an actual budget shortfall of $161 million in a single year because the city is required by law to adopt a balanced budget each year.

The report simply is pointing out the city will not have enough money to keep providing all its existing services if current trends continue. That means some hard choices will have to be made in the coming years about which services to retain and which ones to cut, the study suggests.

Deputy Mayor Tim Ceis, who was briefed on the report yesterday, agreed with that point.

"We've said time and again there is a permanent readjustment that needs to occur to bring our spending down to a sustainable level," Ceis said.

The study, which was backed by the Greater Seattle Chamber of Commerce and the North Seattle Industrial Association, also sought to highlight the importance of business activity to the city's budget.

Businesses pay 54 percent of the taxes that make up the lion's share of the city's general-fund budget. That figure rises to 70 percent when it includes the city's share of the retail sales tax paid by consumers.

Business leaders said the city's reliance on business taxes makes it imperative to do more to encourage business growth.

"If people want the city to be livable, you've got to have someone to pay the bills, and right now it's the business community," said Eugene Wasserman, president of the North Seattle Industrial Association.

That argument is likely to be wielded by Mayor Greg Nickels as he continues to push for redevelopment of South Lake Union as a biotech center and for an expansion of Northgate Mall. Both projects have run into opposition from activists and some neighborhood groups.

Steve Leahy, president of the Greater Seattle Chamber of Commerce, said the timing of the report, while not planned, was "opportune," coming as the City Council takes up the Northgate and South Lake Union issues.

He said Seattle should do what it can to encourage job growth citywide.

The business groups also said the city should focus on reducing labor costs in future negotiations with city unions, though no specific suggestions were made.

Jim Brunner: 206-515-5628 or jbrunner@seattletimes.com

Copyright © 2003 The Seattle Times Company

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