Page 44 - FY 2021-22 Supporting Information

2021-22 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.
Each year’s Total Revenue incorporates revised estimates for prior year receipts, adds revenue growth, and
subtracts revenue reductions to the GF Base.
(2) Revenue Growth: Revenue projections assume the end of pandemic restrictions and the recovery in receipts
with widespread vaccination and herd immunity reached by the end of July. No additional closures are assumed.
If vaccination efforts stall, or if variants prove to be vaccine resistant, there is risk of new outbreaks prompting
renewed restrictions which may impact revenue growth. Revenue Growth for 2021-22 includes receipts from one-
time federal funding sources totaling $703.3 million, and represents an increase of 9.7 percent above adopted
revenue and 4.5 percent above revised. Excluding one-time federal receipts from the revised 2020-21 and
proposed 2021-22 estimates, total General Fund revenue for 2021-22 represents a decline of 0.8 percent from
the 2020-21 adopted budget, but an increase of 8.0 percent above the revised estimates representing the recovery
of the City’s core revenue base. 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.

Total City revenue growth for outgoing years is estimated between 3.4 and 7.3 percent, excluding federal relief
funds. Unless otherwise noted, individual revenue sources reflect continuing growth in fiscal years 2022-23
through 2025-26 based on historical average receipts.

(3) Property Related Taxes include all property tax revenues, Documentary Transfer Tax, Residential
Development Tax, and the redirection of ex-CRA tax increment monies. Assessed Value growth in property tax is
projected at 5.9 percent for 2021-22 based on assumptions for lower growth due to low inflation; redemption
activities are assumed to remain flat as taxpayers become current on delinquencies; and refunds projected to
increase as commercial property owners seek reassessment. 2022-23 is based on economist and industry
forecast estimates and outgoing years assume similar growth.

Documentary Transfer is a volatile revenue in particular when sales volume and price move together. 2021-22
and outgoing years assumes both sales volume and prices remain stable under increasing interest rates as
transfer tax revenue is predicted to reach the peak revenue level seen at the height of the real estate bubble.

The Residential Development Tax is correlated with building permit activity, which have been minimally impacted
by the pandemic. Receipts are assumed to fully recover in 2021-22 and remain stable thereafter.

Ex-CRA tax increment revenue growth is irregular. The estimate for 2021-22 is partly based on the proposed
payment schedule (ROPS) and includes additional one-time miscellaneous revenue from surplus property sales
assumed for 2021-22 and 2022-23. Subsequent fiscal years assume conservative growth based on the trend of
lower tax increment growth (receipts) and increasing pass-through distributions (expenses) and align with property
tax growth assumptions.

(4) Business tax estimates for non-cannabis activities assume a modest recovery in the 2022 annual renewal
period, based on the growth rate from the 2020 renewal period and estimated 2021 tax period receipts as the
base. While tax period growth was lower during the recovery from the Great Recession, this was attributed to the
severity of economic decline and the broad sectors that were impacted. The estimate for 2021-22 reflects the
loss of tax amnesty revenues from an amnesty program conducted in 2020-21, recovery in non-cannabis related
business activity, and continuing growth in cannabis-related business activity. Outgoing years assume high, but
decreasing, growth, primarily attributed to assumptions for cannabis receipts.

Sales tax growth in 2021-22 is 17.5 percent following two years of consecutive declines. Sales tax receipts are
only 4.3 percent above the pre-pandemic revenue realized in 2018-19. Revenue estimates assume the return of
indoor business operations, a decline in unemployment, and low inflation. Subsequent years represents a move
towards the pre-pandemic growth trend.

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