Puget Sound’s economy remains in the doldrums in 2003, after the heights that were reached in the 1990s. Unemployment in the Central Puget Sound region now stands at 7.2 percent. Boeing has shed jobs — an estimated 20,000 here since September 11, 2001 — and other local employers face an uncertain U.S. economy.

The recession that began in 2001 is the third in the last 35 years. In the 1969-1971 recession, 62,000 Boeing Company jobs were lost. The regional economy shed 7.5 percent of all jobs during that period. Between 1981 and 1982, recession caused 11,000 job losses, or about 1 percent of the region’s total jobs

By the first quarter 2003, the Seattle-Bellevue-Everett Primary Metropolitan Statistical Area (PMSA) had lost more than 62,000 jobs compared to 2000 annual levels, or 3.6 percent of the work force.

After declining 1.4 percent in 2001, King County employment continued this downward trend in 2002, losing 3.5 percent more jobs. Forecasts call for another slightly down year in 2003 (-0.3 percent), with gradual improvement through 2006. It will be 2006 before the peak- year employment levels of 2000 occur once more.

The aerospace industry is an important driver of county employment growth. By the end of 2003, the region will have lost 44,700 aerospace jobs from 1998 recent peak year totals of 110,258. With secondary effects, over 111,000 total regional jobs vanished over the five-year period.

The unemployment rate is a lagging indicator of economic health, and so is not expected to decline for some time. After reaching lows near 3 percent in 1998, the King County unemployment rate increased more than 100 percent to 6.3 percent in 2002. The rate is expected to remain above 6 percent for 2003, and then drop as economic growth resumes. While the unemployment rate will stay above levels we have become used to, some perspective on the data shows a moderate employment picture. The regional unemployment rate topped 12 percent during the “Boeing Bust,” and reached 10 percent in 1982. Just a few years ago, 5 percent unemployment was considered “full” employment by most economists.

Seattle has experienced a population rebound since 1980, and the city’s population now exceeds former peak 1960 levels. Another 31,000 new residents are forecast by 2010.

But, as with employment, the lion’s share of population growth has been outside Seattle. In 1960, the majority of county residents lived in Seattle, while by 2000, less than one-third did so. The population of suburban cities has dramatically grown from about 10 percent of the county to 47 percent over the same period, both due to population grown and incorporation.

One result of these trends is a growing mismatch between King County residence and work locations. While only 26 percent of west King County residents work outside the west county area, over 40 percent of east county residents and 57 percent of south county residents commute outside their home areas.

The result of trends in intra-county commuting as the population grows will mean more cars on the roads, more demand for transit services to and from more places, and increasing infrastructure and road maintenance needs. The county has 68 percent of the Puget Sound region’s jobs, but only 53 percent of the population. And the cost of living in King County makes it difficult for many entry-level employees to live where they work.

Over time, median household income in King County has not kept pace with the median cost to buy a home. Recent trends in mortgage rates have narrowed the gap between median income and median home prices; however, the difference between what is affordable and what is available in King County will continue to force many county workers to reside elsewhere.

Improvements in the region’s transportation system can be an important component of economic growth. Transportation investments provide direct employment as well as assisting the movement of individuals and freight. The RTID was given authority to levy six taxes along with tolls, giving it a total of seven funding options. The proposal recognizes the economic condition of the region and attempts not to burden businesses and households.

The tax package recommended for the RTID was selected based on commonly accepted economic principles within the taxes allowed by the authorizing legislation. For simplicity, the principles selected by the recently completed Washington State Tax Structure Commision (also known as the “Gates Commission”) were selected. The following principles guided their selection of appropriate taxes:

• Long Term Adequacy: Are tax revenues in the long-term sufficient to provide the services required?
• Volatility: Are revenues from the tax subject to significant economic or other volatility?
• Regressivity: Does the tax fall more heavily on lower tax brackets than higher tax brackets?
• User fee: Is there a relationship between the tax and the services received?
• Neutrality: Does the tax alter the economic behavior of consumers and favor one type of product over another?
• Simplicity: Is the tax easy for consumers easy to understand and easy to collect?
• Exportability: Is some or all of the tax paid by non-residents of Washington?

Each of the proposed taxes will be evaluated using these criteria. The following table will demonstrate the comparisons.

The economic condition of the Central Puget Sound region urges caution in a significant tax increase. The proposed package represents the balance between what can be afforded by today’s families and businesses and the investments needed to keep the region moving economically. It is significantly lower than the $338 for the average King County household that would be necessary for the RTID list currently being considered (see Tax Burden on Households chart below). In the coming months, the mix of taxes and tolls will be selected which will be broadly supported and which provide the resources to pay for the proposed investments.

1. Retail sales tax, Motor vehicle excise tax, Vehicle license fee, Local gasoline tax, Commercial parking tax and an Employer tax.
2. See Chapter 2, pages 3-7 (external link to Adobe Acrobat .pdf file).

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Updated: Sept. 17, 2003