Fiscal Year 2013-2015 Special Budget Meeting

Deanna J. Santana, City Administrator Subject: Proposed FY 13-15 Proposed Policy Budget Date: April 25,2013 Page 5 As surfaced in the Five-Year Financial Forecast and other documents, the City also has some liabilities related to paid leave accrual and Workers' Compensation. As committed in the forecast, when workload permits, the Administration will analyze these fimds and advance a proposal to increase their balances if appropriate through increased accruals. Overall, the proposed budget continues this Administration's practice of surfacing all major financial issues so that they can be considered and weighed when budget decisions are being made. The Administration believes that the proposed budget strikes the appropriate balance between funding critical operational needs and addressing long term liabilities. 5) Provide past projections versus actuals over a ten-year period regarding revenues and expenditures. The revenue and expenditure projection is part of the budget development process. The projections, like any financial projection, are conducted under a certain set of assumptions and at at a point in time. The projections are usually revised on the third quarter of each year when reporting the quarterly revenue and expenditure (R & E) to the City Council. The R & E budget in comparision to actual realization in the past 5 years are listed in Attachment A . It should be noted that the data presented does not reflect the quarterly adjustment. It is noticable that the recent years projection in the revenue side were much more accurate until 2011-12 due to the dissolution of the Redevelopment Agency, which occured after the budget was adopted. On the revenue side, the variance from FY 2007-08 to FY 2011-12 range from.was -5.8% due to 7.73%. In FY 2010-12, the variance was 7.73% mainly due to the dissolution of the Redevelopment Agency (9.8% variance) and one-time Business License audit (15.10% variance). On the expenditure side, the variance from FY 2007-08 to FY 2011-12 range from .48% to 2.64%. 6) Please develop projections based on the City increasing the Real Estate Transfer Tax (RETT) for homes over $1.1M by a "modest" amount. What are the pros/cons on increasing RETT? As background, the City currently taxes Real Property Transfers at a rate of 1.5%. Any increase to this rate would need to be affirmed by a vote of the electorate. The following two methods look at the effect of doubling the Transfer Tax Rate to 3% and applying that new rate to transfers over $1M. The scenarios look at transfers over the most recent 12 months for which data is available (March 2012 through February 2013); Method A: If the City would have adopted rate of 3% for the full value of properties over $1M, the City would have received an additional $11,670,802 in Transfer Tax revenues. This scenario would apply the higher 3% tax rate to the frill $3M of a $3M property sale. Method B: If the City would have adopted a rate of 3% for the amount of a transfer over $1M, the City would have received an additional $7,170,802 in Transfer Tax revenues. This ltem:_ City Council April 30, 2013