Page 38 - 2020-21 Supporting Information Book_Revised

2020-21 PROPOSED BUDGET
(6) The projected revenue growth in License, Permits, Fees, and Fines is dependent on policy decisions to
increase departmental fees, collect full overhead cost reimbursements on Special Funds with sufficient capacity
FOUR-YEAR GENERAL FUND BUDGET OUTLOOK (OUTLOOK) FOOTNOTES
to do so, and increase reimbursements for those funds that have historically received a General Fund subsidy.
The 2020-21 amount reflects ongoing revenue from LAPD’s contract with Los Angeles County Metropolitan
REVENUE:
(6) The projected revenue growth in License, Permits, Fees, and Fines is dependent on policy decisions to
Transportation Authority for security services and as-needed and part-time related cost recovery. For 2020-21,
increase departmental fees, collect full overhead cost reimbursements on Special Funds with sufficient capacity
reimbursements to the General Fund are based on Cost Allocation Plan 42, which is published by the Controller.
(1) General Fund (GF) Base: The revenue base for each year represents the prior year’s estimated revenues.
to do so, and increase reimbursements for those funds that have historically received a General Fund subsidy.
The assumed modest growth for the outgoing years is within range of the historical average.
The 2020-21 amount reflects ongoing revenue from LAPD’s contract with Los Angeles County Metropolitan
Transportation Authority for security services and as-needed and part-time related cost recovery. For 2020-21,
(2) Revenue Growth: Revenue projections reflect the consensus of economists that the first quarter in 2020 will
(7) A net decline of 7.1 percent in Transient Occupancy tax is assumed for 2020-21 based on industry estimates
mark the start of a recession, however, there is no consensus on its severity or length. Citing the relative good
reimbursements to the General Fund are based on Cost Allocation Plan 42, which is published by the Controller.
of a 60 percent pandemic-driven contraction followed by modest recovery in receipts. A net decline in Transient
health of the pre-pandemic economy, higher state and local government reserves, and current stimulus efforts,
The assumed modest growth for the outgoing years is within range of the historical average.
Occupancy tax from short-term rentals includes the same pandemic-driven assumptions as hotels, as well as the
the Outlook assumes recovery in 2021. The current Safer at Home order is projected to end in May and the
continuing 30 percent reduction to receipts with the full implementation of the City’s home-sharing policy. This
estimated receipts for 2020-21 and revenue growth for outgoing years reflect this assumption. The assumptions
(7) A net decline of 7.1 percent in Transient Occupancy tax is assumed for 2020-21 based on industry estimates
revenue is at the highest risk if the pandemic’s impact to tourism continues even as social distancing measures
for economy sensitive revenues are also based on a single nonessential business closure event and no future
of a 60 percent pandemic-driven contraction followed by modest recovery in receipts. A net decline in Transient
end or if a subsequent Safer at Home order is warranted.
Safer at Home orders. The amounts represent projected incremental change to the base. Any one-time receipts
Occupancy tax from short-term rentals includes the same pandemic-driven assumptions as hotels, as well as the
are deducted from the estimated revenue growth for the following fiscal year.
continuing 30 percent reduction to receipts with the full implementation of the City’s home-sharing policy. This
Parking Occupancy tax has been revised downward in 2019-20 to reflect the impact of the pandemic, and 2020-21
revenue is at the highest risk if the pandemic’s impact to tourism continues even as social distancing measures
receipts are estimated to remain flat. Receipts are expected to recover in 2021-22 and outgoing years assume
The total projected revenue reflects above average growth in 2020-21 attributed to one-time receipts of delayed
end or if a subsequent Safer at Home order is warranted.
average growth. The Power Revenue Transfer estimate for 2020-21 is provided by the Department of Water and
2019-20 payments and deferred tax collection efforts as well as a third quarter economic rebound. Outgoing years
Power and reflects a decrease of 2.5 percent likely due to Power Revenue shortfalls caused by deferred payments
include average growth.
Parking Occupancy tax has been revised downward in 2019-20 to reflect the impact of the pandemic, and 2020-21
related to COVID-19 financial hardships. Following a rebound in 2021-22, no growth in this revenue is assumed.
receipts are estimated to remain flat. Receipts are expected to recover in 2021-22 and outgoing years assume
(3) Property tax growth is projected at 6.6 percent for 2020-21 with historic growth for ensuing fiscal years.
average growth. The Power Revenue Transfer estimate for 2020-21 is provided by the Department of Water and
(8) Revenue from the Special Parking Revenue Fund (SPRF) represents the projected surplus that may be
Documentary Transfer is a volatile revenue in particular when sales volume and price move together. The current
Power and reflects a decrease of 2.5 percent likely due to Power Revenue shortfalls caused by deferred payments
available to transfer to the General Fund after accounting for debt service and other expenditures associated with
year estimate assumes that pricing and sales volume hold steady, as the predicted recession is not being driven
related to COVID-19 financial hardships. Following a rebound in 2021-22, no growth in this revenue is assumed.
the maintenance, upgrades, and repairs of parking structures, meters, and related assets. The annual base-level
by the housing market. Should pandemic-related layoffs result in permanent job loss, there is downside risk to this
surplus is $23.5 million. Any amounts above this are considered one-time receipts and deducted from the
revenue source as well. The Outlook includes steady growth in outgoing years as home prices are restrained by
(8) Revenue from the Special Parking Revenue Fund (SPRF) represents the projected surplus that may be
estimated revenue growth for the following fiscal year. The transfer in 2019-20 was originally budgeted at $33.8
affordability. The Residential Development Tax is another volatile revenue which is being impacted by COVID-19
available to transfer to the General Fund after accounting for debt service and other expenditures associated with
million above the base-level transfer but revised down by $26 million as a result of lower parking meter and parking
and the slowing of construction activity for new dwelling units. A significant rebound is expected in 2021-22 with
the maintenance, upgrades, and repairs of parking structures, meters, and related assets. The annual base-level
lot receipts stemming from the COVD-19 impact The transfer in 2020-21 is $4.2 million more than the annual
a return to gradual growth thereafter.
surplus is $23.5 million. Any amounts above this are considered one-time receipts and deducted from the
base-level transfer. The annual base-level transfer is assumed for the outgoing years.
estimated revenue growth for the following fiscal year. The transfer in 2019-20 was originally budgeted at $33.8
(4) Business tax revenue assumes the recovery of delayed 2019-20 receipts totaling $44.7 million in 2020-21.
million above the base-level transfer but revised down by $26 million as a result of lower parking meter and parking
(9) The Outlook does not include any transfers from the Budget Stabilization Fund (BSF). Transfers from the BSF
Based on declines for previous recessions a 7 percent decrease is assumed for non-cannabis renewal activity.
lot receipts stemming from the COVD-19 impact The transfer in 2020-21 is $4.2 million more than the annual
are subject to an available balance and to restrictions set forth in the BSF ordinance. BSF transfers are considered
Cannabis-related business activity assumes that current-year growth continues at 25 percent with no impact from
base-level transfer. The annual base-level transfer is assumed for the outgoing years.
one-time receipts and are deducted from the estimated revenue growth for the following fiscal year.
the pandemic or recession. Total business tax growth for 2021-22 assumes recovery in non-cannabis business
activity.
(9) The Outlook does not include any transfers from the Budget Stabilization Fund (BSF). Transfers from the BSF
(10) The Outlook does not include any transfers from the Reserve Fund. The 2020-21 Reserve Fund balance is
are subject to an available balance and to restrictions set forth in the BSF ordinance. BSF transfers are considered
3.64 percent of General Fund revenues.
Sales tax growth is based on available economic forecasts and assumes a 5 percent decline for 2020-21 followed
one-time receipts and are deducted from the estimated revenue growth for the following fiscal year.
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
(10) The Outlook does not include any transfers from the Reserve Fund. The 2020-21 Reserve Fund balance is
ESTIMATED GENERAL FUND EXPENDITURES:
will be first realized before the close of 2019-20 and the impact from extended payment periods would continue
3.64 percent of General Fund revenues.
until 2021-22.
(11) General Fund Base: The General Fund base carries over all estimated General Fund expenditures from the
prior year to the following fiscal year.
(5) Electricity Users tax reflects an economic driven decline in 2020-21 consistent with estimates provided by the
ESTIMATED GENERAL FUND EXPENDITURES:
Department of Water and Power, reflecting current assumptions on rates and electricity consumption and adjusted
(12)Incremental changes to the Base: The 2020-21 amount reflects funding adjustments to the prior fiscal year
to reflect uncollectable receipts which are expected to significantly increase as a result of the financial hardships
(11) General Fund Base: The General Fund base carries over all estimated General Fund expenditures from the
General Fund budget. The expenditures included for subsequent years are limited to those obligatory and major
brought on by COVID-19. After a recovery in 2021-22, the outgoing years of revenue are consistent with historical
prior year to the following fiscal year.
expenses known at this time and are subject to change.
growth.
(12)Incremental changes to the Base: The 2020-21 amount reflects funding adjustments to the prior fiscal year
(13) Employee Compensation Adjustments: The 2020-21 amount includes employee compensation adjustments
The 2020-21 reduction in Gas Users tax revenue and no growth outlook is based on the full implementation of a
General Fund budget. The expenditures included for subsequent years are limited to those obligatory and major
consistent with existing labor agreements, full funding for partially financed positions from the prior year, and one
taxpayer settlement agreement that reduces the tax base.
expenses known at this time and are subject to change.
fewer working day in 2020-21. Fiscal years 2021-22 through 2024-25 reflect restoration of one-time salary
reductions from the prior year, changes in the number of working days, and existing labor agreements with City
The decline in Communications Users tax revenue continues due to aggressive wireless plan pricing and the
(13) Employee Compensation Adjustments: The 2020-21 amount includes employee compensation adjustments
bargaining units.
decrease in landline use. Average declines of 7.9 percent are anticipated as part of the Outlook.
consistent with existing labor agreements, full funding for partially financed positions from the prior year, and one
fewer working day in 2020-21. Fiscal years 2021-22 through 2024-25 reflect restoration of one-time salary
reductions from the prior year, changes in the number of working days, and existing labor agreements with City
bargaining units.
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