Funding the Future: A Conversation with Glen Lee, Finance Director of Seattle

Glen Lee has been Finance Director for the city of Seattle since 2010 and has worked for Seattle city government, under six different mayors’ administrations, since 1994. Prior to his move to Seattle, Lee worked in the California State Legislature as a fiscal and policy analyst. Lee received a BS in Agricultural Economics from UC Berkeley and completed graduate studies in Economics at California State University, Sacramento.

In June, Seattle signed into law a $15/hour minimum wage, the highest in the country. From your perspective, what will be the largest advantages of this law for Seattle, and what are some potential stumbling blocks in implementing it long-term?

The policy goal for the mayor and the council was to increase the income of people who earn the lowest wages. They believe that raising the minimum wage is a very effective way to accomplish this goal. Time will tell whether or not a higher minimum wage results in job displacement and movement of industries out of Seattle.

Seattle is finishing up its first year under Mayor Ed Murray. At the beginning of the year, you were optimistic about his transition into office. How does your position as an unelected official with long-running institutional knowledge help ease transitions like these?

We can describe complex technical issues in a short and effective manner to newly elected officials, which (hopefully) helps them determine which issues demand their time immediately, or conversely, what opportunities exist to advance their policy agendas.  For example, with our experience, we are able to describe the financial pressures that are associated with the pension system and provide some options to address these pressures.

Another example, on the upside, is our very strong bond rating: we can explain in a 30 minute orientation briefing what it means to have good ratings and what fiscal policies the city could pursue as a result. So, with good credit, the mayor may decide to develop plans to expand some of the city’s infrastructure at a faster pace than he anticipated. In short, a long-term city employee, such as a finance director, should be able to provide a synopsis of the key issues and the policy buttons, if you will, that newly electeds can push to accomplish their objectives.

Seattle’s proposed 2015-2016 budget cites a relatively large increase in citywide capital spending, including projects such as SPU’s North Transfer Station, some serious one-time investments at Seattle City Light, and the Seawall. Since the citizens of Seattle are known for being fiscally conservative, what kinds of pushback do you expect on these spending increases, if any?

In general, there is slightly less concern expressed for increased capital spending on ratepayer-supported public utilities than for increases to spending supported by general government taxes.

The North Transfer Station is a place where people can go to bring debris, garbage, and other solid wastes. These wastes are then bundled together and shipped by truck or train to the eventual landfill site. This waste disposal system, and the city’s electrical systems, are public utilities supported by ratepayers. In my experience, it’s easier to make a case for increases in capital spending with utility customers, since they can see tangible benefits from the projects they pay through higher rates. This is especially true if the capital spending is to expand utility capacity to accommodate population growth.

It’s my experience that increasing capital spending to rebuild, rather than increase the capacity of, existing general government infrastructure is much more difficult. The city leaders are in a position of saying to taxpayers, “Unless you agree to raise your taxes to pay for this capital project, someday, there could be a catastrophic event because the facility is falling apart and the existing tax base won’t support rebuilding the facility.” While this may be true, it is understandably difficult to convince taxpayers that both the expense, and the tax increase to pay for the project, is necessary.

The city’s elected officials successfully convinced Seattle taxpayers to increase property taxes to rebuild the Seawall. I believe it is essential now that the city be very clear about its progress on the Seawall. This includes being honest about unforeseen problems like construction delays or cost increases, as well as traffic disruptions. You must be explicit with the electorate about how the project is going and whether the city is accomplishing what officials committed to do. But there’s no easy formula for that, and it varies case by case.

On the topic of financial responsibility, let’s talk about Seattle’s excellent bond rating. How does Seattle manage to keep its debt so attractive?

It’s simple, really. Seattle’s economy is very strong, and Seattle elected officials do not have any real appetite for complex or aggressive debt strategies. In my view, there is little interest from Seattle-ites for the city to explore the use of complex financing instruments, nor is there a culture within the city’s administration that encourages using them. As a result, what debt the city issues is very simple and easily supported by a relatively strong tax base.

Like many cities in the I-5 corridor, Seattle has seen a sharp jump in housing construction. As a city that puts great emphasis on being affordable and socially just, how does Seattle plan to navigate these changes in the housing market?

I think it’s important to point out why Seattle is having a large increase in housing construction. It is because Seattle’s economy is very robust. Some of the housing bubbles we’ve seen–particularly in the southwestern US seven to ten years ago–weren’t necessarily because of increased underlying economic activity. Rather, they were functions of speculation. In Seattle’s case, we have had huge expansion in several international firms that have headquarters or operations in the Seattle area. So, there is long-term economic activity that is triggering more workers coming into our community, and more workers mean more demand for housing.

But, with more workers, there are more dollars chasing fewer housing units, so two things happen. First, prices go up. Second, there’s a lot of housing unit construction, and both are happening in the Seattle region. What’s unique in the current environment is that an unusually large proportion of construction is happening within Seattle proper. In the past, that hasn’t been true, but now, new [building] permits are much higher in the city than in the surrounding area.

In order to address the price problem, there are a couple of things the city can do. The first is to permit more construction, and we’re doing that. In particular, we’ve seen a dramatic increase in our vertical housing. There aren’t many acres left to build on in Seattle, so all of our construction goes up. And if you visit our city, you will see literally a few dozen construction cranes around town, not only building office towers but also condominiums and apartments as well.

The other is to provide targeted subsidies of some form to particular populations that policymakers want to ensure have affordable opportunities to live in Seattle. To that point, Mayor Murray has announced a Housing Affordability Task Force, whose purpose is to develop funding strategies for the particular segments of the housing market he is concerned about: generally, housing for lower-income workers. Over the next several months, this group will develop a plan to expand existing, and create new, programs to provide housing for low-income households.

The last time we talked to you, you talked a lot about how Seattle’s booming tech sector–most notably Microsoft and Amazon–has been a buffer against shocks caused by the city’s main economic anchor, Boeing. Taking into account Washington’s recently-passed equity crowdfunding law, what role do you see tech playing for Seattle’s economy down the line?

It’s difficult to forecast when a rate of growth for a segment of a region’s economy will begin to change. Right now, there is a large expansion in the tech sector that I think is fueled not only by Amazon–which is adding 30,000 jobs downtown–but also many other allied industries powered by Amazon that are springing forward. The core issue here is that once a few firms create a relatively large demand for a workforce that supports a specific sector of the economy (in this case an IT-savvy workforce), other firms from that same sector are attracted to the region to take advantage of the workforce. Then, as more jobs become available in the sector, workers with the appropriate skills move into the region with or without a job. Both anecdotal and statistical evidence suggest that we are in this type of growth cycle.

Right now, we see no end to that cycle. So, for now, we will continue to be a corner of both the industry and the labor market for certain segments of the IT industry worldwide. Two of the largest providers of cloud services in the world are headquartered in Seattle­–Microsoft and Amazon–so we have a few thousand engineers who specialize in that segment of the tech sector. If the public sector can keep the education infrastructure and the physical  infrastructure growing at the pace that those industries need to provide for employees, perhaps this cycle could go on for several years.

Feature Photo: cc/(Andrew E. Larsen)