Page 37 - 2020-21 Supporting Information Book_Revised

2020-21 PROPOSED BUDGET
FOUR-YEAR GENERAL FUND BUDGET OUTLOOK (OUTLOOK) FOOTNOTES

REVENUE:

(1) General Fund (GF) Base: The revenue base for each year represents the prior year’s estimated revenues.

(2) Revenue Growth: Revenue projections reflect the consensus of economists that the first quarter in 2020 will
mark the start of a recession, however, there is no consensus on its severity or length. Citing the relative good
health of the pre-pandemic economy, higher state and local government reserves, and current stimulus efforts,
the Outlook assumes recovery in 2021. The current Safer at Home order is projected to end in May and the
estimated receipts for 2020-21 and revenue growth for outgoing years reflect this assumption. The assumptions
for economy sensitive revenues are also based on a single nonessential business closure event and no future
Safer at Home orders. The amounts represent projected incremental change to the base. Any one-time receipts
are deducted from the estimated revenue growth for the following fiscal year.

The total projected revenue reflects above average growth in 2020-21 attributed to one-time receipts of delayed
2019-20 payments and deferred tax collection efforts as well as a third quarter economic rebound. Outgoing years
include average growth.

(3) Property tax growth is projected at 6.6 percent for 2020-21 with historic growth for ensuing fiscal years.
Documentary Transfer is a volatile revenue in particular when sales volume and price move together. The current
year estimate assumes that pricing and sales volume hold steady, as the predicted recession is not being driven
by the housing market. Should pandemic-related layoffs result in permanent job loss, there is downside risk to this
revenue source as well. The Outlook includes steady growth in outgoing years as home prices are restrained by
affordability. The Residential Development Tax is another volatile revenue which is being impacted by COVID-19
and the slowing of construction activity for new dwelling units. A significant rebound is expected in 2021-22 with
a return to gradual growth thereafter.
(4) Business tax revenue assumes the recovery of delayed 2019-20 receipts totaling $44.7 million in 2020-21.
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 25 percent with no impact from
the pandemic or recession. Total business tax growth for 2021-22 assumes recovery in non-cannabis business
activity.

Sales tax growth is based on available economic forecasts and assumes a 5 percent decline for 2020-21 followed
by 3.8 percent average growth in the outgoing years. Subsequent to the formulation of this estimate, the State
extended the due date for the payment of quarterly sales tax owed by businesses. The reduction to City receipts
will be first realized before the close of 2019-20 and the impact from extended payment periods would continue
until 2021-22.

(5) Electricity Users tax reflects an economic driven decline in 2020-21 consistent with estimates provided by the
Department of Water and Power, reflecting current assumptions on rates and electricity consumption and adjusted
to reflect uncollectable receipts which are expected to significantly increase as a result of the financial hardships
brought on by COVID-19. After a recovery in 2021-22, the outgoing years of revenue are consistent with historical
growth.
The 2020-21 reduction in Gas Users tax revenue and no growth outlook is based on the full implementation of a
taxpayer settlement agreement that reduces the tax base.

The decline in Communications Users tax revenue continues due to aggressive wireless plan pricing and the
decrease in landline use. Average declines of 7.9 percent are anticipated as part of the Outlook.

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