A few hours ago WAMU (Washington Mutual Savings Bank) ceased to exist, seized by Federal regulators, and partially sold to J. P. Morgan. WAMU was a modern day success story, going from a small Seattle savings and loan to a national banking powerhouse headquartered in two gleaming new skyscrapers in downtown Seattle. Seattle is a center of 20th and 21st Century innovation, but, like the national economy, is stumbling just a bit. What are the effects of our current economic troubles on Seattle as a City, and upon its city government?
Seattle is a hotbed of innovation: examples abound. Weyerhaeuser and forest products, Boeing and jet planes, Amazon.com and e-tailing, Starbucks and coffee, Microsoft and software, WAMU and banking. One success story after another. There are a few recent setbacks, perhaps not so widely known. Boeing has employment of about 74,000 in the State, down from a peak of 106,000 in 1989, and is in the middle of a machinists’ strike. Weyerhauser and Starbucks have both recently announced significant layoffs. SAFECO Insurance has be acquired by an out-of-state company. And WAMU headquarters will dissolve away to New York City, its buildings probably going on the market and many employees laid off.
What effect will these changes – and the dire national economic news – have on the City government of Seattle and government in general?
Traditionally, in good times people expect more services from their government, just as they expect more services from private companies (banks, insurance, retailers).
In bad economic times… well … people expect more services from their government! Unemployment insurance, homeless shelters, Medicare, “the support net”. Oh yes – and demands for public safety, libraries and parks (inexpensive entertainment) all increase as well.
Washington State’s tax system is built on two legs – property tax and sales tax. We don’t have an income tax.
So what happens to us in tough times? First, the economy in the Seattle area is still strong – just look at all the cranes around downtown Seattle or Bellevue, and we have a lot of well-paying jobs and relatively low unemployment. Amazon.com, Google and Microsoft are going strong and hiring. Nevertheless, sales taxes plummet as people – even people with good jobs – look at the national economy and cut back on spending. And, although property values here are still relatively high (they’ve gone down a bit), property taxes are, at best, stable. So, without an income tax, overall resources available to government are dropping.
What does this mean to the City government of Seattle? Well, we’ll get a glimpse on Monday at 2:00 PM, when Mayor Nickels delivers his budget to the Seattle City Council. You can watch it live on the City’s version of YouTube, www.seattlechannel.org . And the whole budget document will be online at www.seattle.gov then as well.
What are the implications of these reduced revenues for technology in government?
Ideally, in tough times, businesses and governments continue their technology investments in order to improve their efficiency and effectiveness. Over the next few weeks and months I’ll tell you how Seattle has done that. I’ll include some of our shortcomings and warts, as I’ve done before in Bleeding Edge Government. And I’ll give you some hints about some interesting things coming down the pike.
But, for the time being, I weep for once-powerful WAMU, tighten my personal belt a bit, and am prepared to help the City government of Seattle weather the storm through wiser use of technology.