Page 15 - FY 2022-23 Revenue Outlook

Revenue Assumptions for Fiscal Year 2022-23

Two years ago, the onset of the COVID-19 pandemic and the public health
measures meant to control its spread brought on massive disruption to businesses,
the economy, and society at large. In 2020, the impact of the pandemic to the
economy was swift and uneven. Unemployment within the City shot up from
4.7 percent (February 2020) to 19.1 percent three months following the most
stringent public health restrictions. The pandemic is still with us today; although
the public health urgency has lessened, and the economy is experiencing a robust
recovery including a decrease in the unemployment rate to 4.9 percent (March
2022) with the end of restrictions. Cyclical COVID-19 outbreaks—local or along
the supply chain—still pose risks to the City’s projected revenue growth. Many
adaptations and innovations in how we live, work and play will outlast the
pandemic, shaping City revenues. In this new environment, more familiar risks
from inflation, interest rate increases, and conflict abroad have increased the
immediate risk of a recession within the next year. As neither a new outbreak nor
an economic downturn is given, revenue assumptions for 2022-23 are based on
current trends in receipts, analyses conducted by departments and relevant
industry forecasts.

2020-21 Actual General Fund Receipts

Representing approximately 70 percent of General Fund’s core revenue base are
seven major taxes: property, utility, business, sales, document transfer, transient
occupancy, and parking occupancy, all of which are vulnerable to declines during
an economic downturn. Since 1990 actual receipts from these sources have
averaged 3.7 percent growth, yet, during the second year of the Great Recession
these combined receipts declined 4.8 percent. Comparatively, the net decline
(-0.1 percent) for these taxes seen in the first full year of the pandemic (2020-21)
was eclipsed by the losses (-0.8 percent) that followed the bust of the 2000 tech
bubble. The largest 2020-21 declines were seen in sales, transient occupancy, and
parking occupancy taxes as these were directly impacted by public health
restrictions and business closures; although increasing delinquencies and tax
relief measures also contributed to shortfalls. Conversely, documentary transfer
tax revenue grew with increased homes sales and prices, partly attributed to
homebuyers seeking out larger homes and yards in less dense neighborhoods.

2021-22 Revised General Fund Revenue

Total revised General Fund revenue for 2021-22 is $7.63 billion, an increase of
1.7 percent ($123.8 million) above the adopted revenue budget of $7.50 billion.
The revised estimate is an 8.8 percent increase from 2020-21 actual receipts. Both
fiscal years include the receipt of $639.5 million in American Rescue Plan relief

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