Page 25 - FY 2020-21 Revenue Outlook

General Fund Revenue Outlook
Fiscal Years 2019-20 through 2024-25
General Assumptions

Sales Tax Sales tax revenue for 2019-20 and 2020-21 reflect growth assumed for the
pandemic and recession as provided by the City’s sales tax consultant. After the
development of these estimates, the State decided to allow businesses to defer the
remittance of collected sales taxes. Because the impact of this deferral could not
be accurately quantified, the budget has used estimates between the consultant’s
most-likely and conservative scenarios. The consultant has subsequently identified
a total risk of $95 million in possible deferred tax payments from 64,000
businesses.
Subsequent years assume growth based on the sales tax consultant’s forecast.
Business Tax Business tax growth for 2019-20 has increased based on prior year revenue and
current renewal and non-renewal receipts for all business activity; however, the
estimate for actual receipts has been reduced by $44.7 million to reflect the impact
Civic Center closure and deferred tax collection efforts.
Recovery of delayed receipts are assumed in the 2020-21 revenue estimate. Based
on declines for previous recessions a 7 percent decrease is assumed for non-
cannabis renewal activity. Cannabis-related business activity assumes that current-
year growth continues at 24 percent with no impact from the pandemic or recession.
Total business tax growth for 2021-22 assumes recovery in non-cannabis business
activity. Subsequent years reflect above-average growth from the recent addition of
recreational cannabis tax revenue.
Transient Occupancy Current year transient occupancy tax (TOT) revenue from hotels has been revised
Tax downward to reflect actual receipts and the projected drop in last quarter receipts
from the impact of the pandemic. A net decline of 7.1 percent is assumed for 2020-
21 based on industry estimates of a 60 percent pandemic-driven contraction
followed by modest recovery in receipts.
A net decline in in TOT from short-term rentals includes the same pandemic-driven
assumptions as hotels, as well as the continuing 30 percent reduction to receipts
with the full implementation of the City’s home-sharing policy.
Total receipts are expected to recover in 2021-22 and outgoing years assume
average growth.
Power Revenue The Power Revenue transfer amount for 2019-20 has been reduced to reflect
Transfer adjustments made for actual 2018-19 power system revenue. The transfer for
2020-21 is based on the low estimate provided by the Department of Water and
Power (DWP) which is derived from assumptions for estimated 2018-19 Power
System revenue. DWP was unable to provide a revised estimate reflecting the
impacts of the pandemic and recession. The final transfer amount may be adjusted
to conform to actual 2019-20 power system revenue in accordance with audited
financial statements. Outgoing years assume a fixed transfer amount.
Documentary Documentary transfer tax revenue is volatile and can have large swings when
Transfer Taxes home sales volume and prices move together. Revenue for 2019-20 has been
increased, reflecting receipts-to-date, and 2020-21 revenue is estimated to remain
flat. Growth in outgoing years is based on historical growth. Projected receipts from
legal entity transfers assume similar low growth.
Parking Fines Parking fine receipts-to-date are above planned receipts for 2019-20; however, the
revised $135 million has been reduced by $15.6 million to reflect relaxed
enforcement and extended due dates granted during the pandemic. Revenue for
2020-21 is based on the Department of Transportation estimate as well as the
recovery of $5.5 million in delayed fine remittances. Outgoing years assume
revenue from citations remains flat.

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